Journal of Business Ethics (2006)
DOI 10.1007/s10551-006-9027-3
Rebounding from Corruption:
Perceptions of Ethics Program
Effectiveness in a Public Sector
Organization
ABSTRACT. We examine the perceived importance of
three organizational preconditions (awareness of formal
ethics codes, decision-making techniques, and availability
of resources) theorized to be critical for ethics program
effectiveness. In addition, we examine the importance of
ethical leadership and congruence between formal ethics
codes and informal ethical norms in influencing employee
perceptions. Participants (n=418) from a large southern
California government agency completed a survey on the
perceived effectiveness of the organization’s ethics program. Results suggest that employee perceptions of
organizational preconditions, ethical leadership and
informal ethical norms were related to perceptions of
ethics program effectiveness. Based on these findings,
organizations should evaluate the presence (or absence) of
essential preconditions and take steps to ensure that
leaders model espoused organizational values to foster
perceptions of effective ethics programs.
KEY WORDS: decision making, ethics, leadership,
preconditions, program effectiveness
Kathie L. Pelletier is a doctoral student in the School of
Behavioral and Organizational Sciences at Claremont
Graduate University, 123 East Eighth Street, Claremont,
CA 91711; e-mail: kathie.pelletier@cgu.edu. Her research
interests include organizational ethics, ethical leadership, and
women’s issues in the workplace.
Michelle C. Bligh is an assistant professor of Organizational
Behavior in the School of Behavioral and Organizational
Sciences at Claremont Graduate University, 123 East
Eighth Street, Claremont, CA 91711; e-mail: michelle.
bligh@cgu.edu. Her research interests include charismatic
leadership, political and executive leadership, and organizational culture.
Ó Springer 2006
Kathie L. Pelletier
Michelle C. Bligh
Examples in the organizational world over the
last two decades illustrate the detrimental impact of
unethical decision making, including insider trading
scandals on Wall Street (Werhane, 1989) and the
Salomon Brothers scandal in 1991 (Sims and
Brinkmann, 2002). Other examples of unethical
organizational practices include fraudulent billing
for Medicaid services, the moral failings of the
United States’ tobacco industry (Schwarz, 2001),
Enron’s scheme to illegally manipulate prices in
California’s energy market, and the subsequent
shredding of evidential documents by the consulting firm of Arthur Andersen (Cohan, 2002). In
many of these cases, leadership philosophies were
blamed for their adverse effect on organizational
culture, which in turn had ethical implications
for customers and employees within those organizations.
These unfortunate outcomes may be a result of
the ways organizations and their employees perceive the importance and function of ethical decision-making processes. If the organization does not
live up to its code of ethics (if such a code exists),
or encourage employees to seek guidance during
ethical deliberations, employees might feel that the
organization puts ethics on the ‘‘back burner.’’
Coupled with other organizational and societal
factors, such as the emphasis on employee quality
of life, severe consequences for unethical behaviors,
negative political ramifications, and unfavorable
media attention, it is clear that organizations need
to devote increased attention to ethical issues. In
addition, there is growing evidence that unethical
decisions often undermine the financial performance of organizations (Clark and Leonard, 1998).
Kathie L. Pelletier and Michelle C. Bligh
Now, more than ever, organizations and their
members need guidance in creating mechanisms for
instilling ethical dialogue and decision making that
serve the best interests of their customers and
stakeholders. For many organizations, the primary
mechanism is the development of a formal ethics
program, yet there is a dearth of research on what
comprises these programs and what makes them
effective.
The study of ethics can be defined as ‘‘the discipline relating to right and wrong, moral duty and
obligation, moral principles and values, and moral
character’’ (Beck, 2002, p. 13). Ethics has also been
defined as the rules or principles that define right or
wrong conduct (Bartels, 1967). These principles are
primarily developed from one’s cognitive moral
development (Blasi, 1980; Kohlberg, 1969), value
base, or moral philosophies (Cavanagh et al., 1981).
Thus, ethical decision making is the process whereby
individuals use their moral base to determine whether a certain situation or issue is right or wrong.
The purpose of the current study is to examine
perceptions of some of the organizational and
managerial conditions that may facilitate or hinder
ethical decision making, and the implications these
findings may have for developing effective ethical
programs in the future.
aimed at stimulating morally responsible behavior,
what factors should the organization take into account? Researchers have suggested several factors
that are within the organization’s control, including
the development and communication of formal
ethical codes, training in ethical decision making,
and the establishment of congruency between stated
policy and actual behaviors.
Based on these factors, we focused our literature
search on models that have direct bearing on the
development of an effective ethics program. We will
briefly discuss three theoretical models that take as
their focus perceptions of ethics program effectiveness before turning to an in-depth discussion of each
of the organizational factors in McDonald and
Nijhof’s (1999) model. We chose to test McDonald
and Nijhof’s (1999) model because it incorporates
key variables often included in ethical decisionmaking models, such as importance of ethics codes,
decision-making processes, resources, and organizational norms (see Ferrell and Gresham, 1985;
Hunt and Vitell, 1986; Trevino and Youngblood,
1990). In addition, their theoretical model presents a
number of organizational preconditions for stimulating morally responsible behavior that may have
practical implications for the design of ethics
programs.
Understanding ethical practices in
organizations
Ethical decision-making models
According to the results of a 2002 national survey of
200 cities in the United States, 81.5% of cities with
populations over 250,000 have incorporated ethics
training, with over two thirds of the cities adopting a
code of ethics (West and Berman, 2004). Further, in
the 2003 National Business Ethics Survey, 82% of
respondents perceived that top management modeled ethical behavior and talked about the importance of ethical decision making (Clark, 2003). The
rising interest in ethics among practitioners and
academicians has stimulated a growing number of
models and empirical studies of ethical decision
making in organizational settings (e.g., Bartels, 1967;
Ferrell and Gresham, 1985; Hunt and Vitell, 1986;
McDonald and Nijhof, 1999; Trevino and Youngblood, 1990). These models attempt to address a
critical question: when implementing a program
Ferrell and Gresham (1985) developed a contingency framework for understanding ethical decision
making based on three principal antecedents. The
first antecedent of ethical decision making considers
individual factors (values, beliefs, knowledge, attitudes, and intentions) that an employee brings to
the situation. The second takes into account significant others in the organizational setting, and the
third antecedent concerns opportunities for ethical/
unethical action. Opportunities for ethical action
may result from a favorable set of conditions that
facilitate ethical decision making (i.e., establishment
of professional codes and corporate policies) or
when there are opportunities to receive feedback
for the decision (i.e., reward/penalty systems).
However, opportunities for unethical action (i.e.,
lack of ethical expectations, corporate policies not
enforced) are also important. Ferrell and Gresham
Ethics Program Effectiveness
(1985) found that merely having the opportunity to
act unethically actually influenced behavior, and
individual factors interacted with organizational
factors to influence ethical or unethical decision
making. Based on this model, developing a formal
ethics program, establishing professional codes and
policies, providing ethics training, and establishing
appropriate support systems should all be organizational concerns.
Hunt and Vitell (1986) prescribed a detailed
model that examined the evaluation process in ethical decision making. These researchers identified
that intentions, consequences, deontological norms,
alternatives and situational constraints may predict or
explain certain ethical behaviors. Their model addresses the situation where an individual is presented
with an ethical dilemma, and the perception of
various possible alternatives. Once the individual
perceives the set of alternatives, the researchers
suggest that two kinds of evaluations will take place
– a deontological evaluation and a teleological
evaluation. Deontological evaluation consists of
evaluating the inherent rightness or wrongness of the
behaviors implied by each alternative; teleological
evaluation consists of four constructs ranging from
perceived consequences of each alternative for various stakeholder groups, desirability or undesirability
of each consequence, probability that each consequence will affect each stakeholder group, and the
importance of each stakeholder group. The heart of
this model postulates that an individual’s ethical
judgments are a function of the person’s deontological and teleological evaluations.
Based on Hunt’s and Vitell’s (1986) model, an
organization that is seeking to improve ethical
decision making should ensure that suitable decision-making processes exist. Those processes should
provide mechanisms for involving employees in the
decision-making process. Further, decision makers
should be exposed to training on deontological
evaluation and should be aware of available alternatives to assist them in their decision-making
processes.
McDonald and Nijhof’s (1999) model expands
the conditions beyond those postulated by Ferrell
and Gresham and Hunt and Vitell necessary for
ethics program effectiveness. McDonald and Nijhof
posit that for stimulating morally responsible behavior
(the primary objective of an ethics program), three
organizational conditions must be present: awareness
of formal organizational goals and corresponding
informal norms, suitable decision making procedures
and corresponding informal norms, and sufficient
distribution of resources. Like Ferrell and Gresham
(1985), they also argue that employees must have the
necessary skills and personal intentions for ethical
behavior prior to gaining employment in the organization.
The first factor in this model, awareness of formal
goals and corresponding informal norms, necessitates
that the organization has a formal ethics code defined
in written ethics policies, corporate codes of conduct, ethics handbooks, and/or any written communication that provides ethical guidelines. Further,
McDonald and Nijhof (1999) suggest that for these
formally stated goals to be effective, informal norms
and values must be in place that support and reinforce formal ethical policies.
The second factor in the model is defined as the
level of official agreement on suitable decisionmaking processes. Since organizations have internal
decision structures, it is important to examine the
influence of that structure on the degree to which
employees can assume responsibility for making
decisions when moral issues arise. If employees do
not have authority to participate in the decisionmaking process, it becomes difficult for them to live
up to certain responsibilities. As with ethics code
awareness, procedures for decision making also have
an informal component. According to McDonald
and Nijhof (1999, p. 136), ‘‘Just as the organizational
norms have a formal and informal side, the same is
true for the procedures for decision making.’’ For
example, informal procedures for decision making
are the degree to which discussion about morality is
encouraged during the evaluation stage of the
decision-making process. Discussion must be legitimized for the employee to feel congruence between
informal and formal codes.
The last organizational factor in this model
concerns the availability of resources. Specifically,
are there resources present to facilitate decision
makers to act in a responsible way? McDonald
and Nijhof (1999) break down resources into four
categories: information, finances, existing equipment and time. Decision makers must be able to
make informed decisions through access to
key information, which may be obtained by
Kathie L. Pelletier and Michelle C. Bligh
contacting an ethics ombudsperson or through an
ethics hotline. Further, the organization must be
in a position, financially, to be able to lose a
contract if it is ethical to do so, and to procure
necessary ethics training tools. Finally, the decision
makers must have the time to seek information to
evaluate the appropriateness of their potential
decision.
We have chosen to focus our study on the
organizational level conditions presented in these
models, as these factors are critical in influencing
ethical decisions and can be the foundation for the
development of effective ethics programs. Although
the individual factors discussed in previous models
(e.g., moral intention and personal values) may also
be crucial in determining ethical decision making,
they tend to be formed prior to the employee’s entry
into the organization. Consequently, they were not
examined in this study.
Ethics and leadership
In addition to the factors outlined above, leadership
may play a critical role in fostering an effective ethics
program. Schein (1985) notes that top managers
attempt to communicate organizational values to
employees to shape their behavior. The ethical orientation of the leader, in terms of specific behaviors
and traits, is a key factor in promoting ethical
behavior in an organization (Posner and Schmidt,
1992). Previous research also suggests that training
employees on ethics policies and enhancing decision-making skills is particularly effective when the
leader acts as a role model and coach who models,
supports, and reinforces good ethical behavior
(Baumhart, 1961; Posner and Schmidt, 1984;
Schein, 1985; Sims, 1998).
These earlier findings suggest that in addition to
the preconditions theorized in McDonald and Nijhof’s (1999) model, perceptions of ethical leadership
may be another precursor to effective ethics programs. In companies where senior managers and
supervisors demonstrate ethical leadership, employees are less likely to observe unethical conduct and
are more likely to seek advice when faced with
ethical dilemmas (Trevino et al., 1999). When an
organization is seeking to re-establish social
legitimacy as a result of ethical misconduct, the role
of leadership is crucial for enhancing an ethical
culture. Particularly in the public sector, any instance
of ethical misconduct is likely to result in negative
publicity and loss of public and employee trust.
Consequently, it is important for public agencies, as
well as private sector organizations, to recruit ethical
individuals in key leadership positions to foster an
ethical culture.
The organization examined in this study was
involved in a corruption scandal that implicated
top elected and non-elected officials, with litigation
spanning three years. To begin re-establishing
social legitimacy, the organization implemented an
ethics program that has been in place for approximately eighteen months. At the time of data
collection, the ethics resource office was in the
initial stages of developing an ethics training program for its leaders. To develop a curriculum for
the training series, employee perceptions of the
conditions for an effective ethics program and
ethical leadership were sought. It is important to
emphasize that this study measures employee perceptions of ethics program components, program
effectiveness, and all model variables; thus, our
focus throughout the paper is on how employees
perceive relevant components of ethical programs,
and cannot be interpreted as factual accounts of
actual (objective) variables and outcomes. Nonetheless, employee perceptions can provide critical
insights into attitudes toward ethical program
components and their effectiveness, and these
perceptions are likely to be important correlates of
more objective program outcomes.
Given this context, the current study has three
primary purposes: (1) to empirically test the theoretical model proposed by McDonald and Nijhof
(1999) to determine if the three organization level
preconditions are important in predicting perceptions of ethics program success in an organization
that is currently striving to re-establish public trust;
(2) to examine the degree of congruence between
formal organizational codes and informal norms, and
determine whether this level of congruence is related
to perceptions of overall ethics program effectiveness; and (3) to extend McDonald and Nijhof’s
model by incorporating perceptions of ethical leadership as an additional precondition for ethics
program effectiveness.
Ethics Program Effectiveness
Formal ethics codes
A formal ethics code can usually be found within the
company’s mission statement, the employee handbook, ethics statements and brochures, or other formal written media (Korsgaard et al., 2002; McDonald
and Nijhof, 1999). There is a substantial amount of
literature focused on the issue of corporate codes of
ethics; however, little research has been devoted to
examining whether ethics codes are effective in
improving ethical decision-making behavior, and the
research that has been conducted has produced mixed
findings (Clark and Leonard, 1998; Ford et al., 1982;
Schwarz, 2001; Stevens, 1999).
Ford et al.’s (1982) empirical study reported minimal effects of corporate codes of conduct on
employees’ behavior. More than a decade later, Clark
and Leonard (1998) found that codes of ethics were not
influential in determining a person’s ethical decisionmaking behavior. Although these two studies concluded that corporate codes of ethics were not effective
in influencing a person’s ethical decision-making
behavior, several studies contradict these findings.
Hegarty and Sims (1979) evaluated unethical decision
behavior under different policy and organizational
environment conditions, and found that ethics policies
significantly reduced unethical behavior. In addition, a
more recent study found that employees asked ethics
officers numerous questions about a recently developed code and directly modified their behavior after
having evaluated the ethical code (Schwarz, 2001).
Ethics codes and corresponding informal norms
As stated above, a code of ethics is a formally written
policy statement that describes an organization’s
primary values and the ethical rules it expects its
employees to follow. Informal codes or norms, on
the other hand, are the values, attitudes, and
behaviors that employees perceive, and may be either consistent or inconsistent with formal codes.
Informal norms, therefore, influence the degree to
which employees perceive that compliance to the
ethics codes or policies is supported and rewarded by
upper management. With regard to decision-making
processes, informal norms encourage deliberation
about ethical issues and legitimize discussion about
ethical concerns.
We suggest that one of the primary reasons for
mixed findings regarding formal ethics codes may
lie in the congruence (or lack thereof) between
formal and informal ethics codes. As a result, a
number of important research questions have yet
to be addressed. For example, do organizational
members act more ethically simply because a formal code of ethics has been established? What
roles do organizational norms play in shaping
employee and managerial moral viewpoints and
subsequent responses to ethical dilemmas? Further,
to what degree are informal codes in alignment
with what is written? The congruence of formal
and informal codes of ethics thus merits further
examination in determining the perceived effectiveness of ethics interventions (Ashkanasy et al.,
2000; Baumhart, 1961; Korsgaard et al., 2002;
Stevens, 1999).
Many organizations formulate and communicate
ethical codes in an attempt to influence norms and
values (Victor and Cullen, 1988). However, in
addition to formal codes, McDonald and Nijhof
(1999) also recommend considering informal
norms, especially organizational support for
responsible behavior through the informal ‘‘reward
system.’’ Organizational decision makers have
multiple relationships, and if these other individuals
do not support and acknowledge ethical behavior,
despite official organizational norms, it becomes
more difficult for employees to evaluate and act
upon their own beliefs of what is viewed as moral
behavior.
In some cases, organizational norms that delineate
the ‘‘right’’ thing to do might conflict with written
policies. For example, if organizational norms specify
that it is unacceptable to accept a bribe or kickback
from a contractor, but the employee witnesses such
an action, he or she may experience dissonance
between what is stated and what is actually being
done. In effect, the written policy will have no
credence with the employee because management is
implicitly reinforcing another message, one that is
not congruent with written policy. Based on the
more recent ethics code research, we offer the following hypotheses:
H1a: There will be a positive relationship between
awareness of formal organizational ethics codes
and perceptions of ethics program effectiveness.
Kathie L. Pelletier and Michelle C. Bligh
H1b: Perceptions of informal ethical norms will strengthen the relationship between ethics code awareness
and perceptions of ethics program effectiveness.
Decision-making processes
The second organizational factor in McDonald and
Nijhof’s (1999) model refers to suitable decisionmaking processes that increase the likelihood of
making ethical decisions. According to French
(1984), every organization has an internal decision
structure that is comprised of two elements. The
organizational or responsibility flowchart delineates
levels within the corporate power structure and the
corporate-decision recognition rules that are normally described in ethics policy clarify the authority
employees have when confronting ethical dilemmas.
The internal decision structure has an influence on
the extent to which employees can bear moral
responsibilities. Similar to French’s (1984) internal
decision structure, these processes delineate levels
within the decision-making structure and describe
the degree of involvement employees should have in
the decision-making process. Perceptions of suitable
ethical decision-making processes are defined as
employees’ beliefs that (1) the organization trains
individuals to evaluate alternatives (identify the risks
and consequences of the decision), (2) management
encourages the use of evaluation techniques when
making ethical decisions, (3) management encourages dialogue for discussing and resolving ethical
dilemmas, and (4) employees understand the
expectations with regard to their level of authority in
the decision-making process.
Decision-making processes and informal norms
An ethics program should be designed around a
formal decision-making process whereby employees
are encouraged to participate in ethical deliberations
(Hunt and Vitell, 1986). Just as organizational norms
have a formal and informal component, so does the
decision-making process. Employees should perceive the ethics program as providing resources to
guide them in ethical deliberations, as well as
accommodating and legitimizing discussion of
potential ethical issues.
There are a few studies that have examined the
importance of informal norms on ethical behavior
and decision making. Ashkanasy et al. (2000) predicted that group and organizational level values
would be related to the quality of ethical decision
making and tolerance of unethical behavior. In this
study, ethical behavior endorsement increased with
level in the organizational hierarchy, implying
managers lead the way as role models in ethical
behavior. Since use of a formal code of ethics was
determined by perceptions of others’ use of the
code, this study suggests that senior managers play a
pivotal role in reinforcing informal norms by disseminating messages of such codes and supporting
decision-making processes that stimulate ethical
dialogue and promote ethical inquiry.
Nwachukwu and Vitell (1997) examined the
extent to which organizational culture influences
ethical judgments. They found no significant differences in ethical evaluations of advertisements of
harmful products in organizations with formal codes
of ethics and those in organizations without formal
ethics codes. One surprising result from the study
was that in organizations that strictly enforced their
codes of ethics, employees perceived advertisements
on harmful products to be more unethical than those
in organizations without formal ethics codes. Hence,
the degree of enforcement of ethics policies may be
important in influencing ethical judgments. Merely
stating company expectations may not be sufficient
in influencing employee attitudes and values. Second, it is possible that ethical judgments were
moderated by organizational norms regarding ethics.
In organizations with formal codes of ethics, it may
be the assumption of practitioners that ‘‘someone
else’’ (e.g., top management) is mandating specific
ethical considerations, and in organizations without
formal codes of ethics, individuals may believe that
they have to take responsibility for their own decisions. Based on these arguments, the following
hypotheses are presented:
H2a: There will be a positive relationship between perceptions of ethical decision-making processes and
perceptions of ethics program effectiveness.
H2b: Perceptions of informal ethical norms will strengthen the relationship between perceptions of suitable
decision-making processes and perceptions of ethics
program effectiveness.
Ethics Program Effectiveness
Availability of organizational resources
The previous discussion highlights the body of research that examines the value of ethics codes and
decision-making processes, and the importance of
congruency between formal and informal norms and
processes. These concepts are important and
imperative for an ethics program to be successful in
educating employees about how to make decisions
that are ethical. In addition to these factors, it may be
beneficial to examine why decision makers choose
alternatives that are questionable.
In a recent study, researchers considered both
organizational and personal consequences as factors
that influenced decision makers to act more or less
ethically; specifically, the potential consequences of a
decision included enhancement of organizational
profit versus enhancement of personal economic
well being (Hoffman et al., 1998). The findings
suggested that individuals tend to act less ethically
when the personal consequences included risking
personal economic well being (e.g., the loss of one’s
job, loss of pay, demotion) than when the consequences of the decision disadvantaged the profitability of the organization. Similarly, unethical
decision making was more prevalent when the participant perceived the organization as relying on the
decision in order to survive.
Other factors, such as time pressures and organizational financial stability, might exist and may
substantially affect the decision-making process. For
example, a report on workers, managers, and executives in multiple industries revealed that workers
often attributed ethical violations to workplace
pressures. These pressures were defined as long
hours, sales quotas, job insecurity, balancing work
and family, and personal debt (Ethics Officer Association, 1999).
These findings correspond to the third organizational level condition in McDonald and Nijhof ’s
(1999) model, availability of resources. As defined in
their model, this organizational condition is comprised of three facets: the extent to which the
organization provides information to all levels of
employees regarding the handling of ethical dilemmas (information), the extent to which the
employees perceive they have the time to evaluate
alternative options (time), and the extent to which
the employee perceives the organization to have
sufficient financial resources (money) to choose the
most responsible alternative. Based on these factors,
we posit the following:
H3: There will be a positive relationship between availability of resources (information, time and money)
and perceptions of ethics program effectiveness.
Beyond ethical codes, decision making, and resources:
the necessity for ethical leadership
The old adage ‘‘actions speak louder than words’’ has
significance in recent research on ethics. In today’s
era of mass media, instances of corruption have been
highly publicized, with an emphasis on the negative
effects of the unethical behavior on the organization’s employees; consequently, organizations are
increasingly realizing that their leaders need to be
more sensitive to their moral obligations to stockholders and employees. According to Kanungo and
Mendonca (1996), an organization’s survival over
the long term is dependent on ethical leadership.
Moreover, to the extent the organization’s top
leaders model espoused values, employees and
stakeholders perceive leaders to be ethical. It is largely accepted that an important function of organizational leadership is to articulate ethical
expectations and to establish the norms that govern
employee behavior (Bennis and Nannus, 1985). In
many organizations, the code of conduct or an ethics
code serves as the medium for communicating those
expectations with leader values and behaviors serving as the foundation for organizational norms.
Schein (1985) asserts that top managers attempt to
communicate their organizational values to
employees to shape behavior, lead the agency, and
develop an ethical organizational culture. The ethically oriented organization is one that has the
capacity to reflect on values in the decision-making
process and establish how leaders can use these
observations in managing the organization (Hood,
2003). According to Kanungo and Mendonca
(1996), factors of ethical leadership in creating an
ethical orientation include the leader’s use of a participative leadership style, whereby leaders attempt
to influence subordinates through empowerment
rather than control. They are sincerely motivated by
Kathie L. Pelletier and Michelle C. Bligh
a consideration for others and they lead subordinates
toward objectives that are in the interest of the entire
organization, its members, and the outside community.
In addition to communicating organizational
values, leaders are also responsible for the organization’s moral climate that reflects the moral development of both leaders and followers. Further,
leaders can facilitate the moral development of followers through the implementation of morally
appropriate influence strategies and tactics guided by
moral intent (Mendonca, 2001). In many organizations, it is the ethics program that provides the
strategies and resources (e.g., ethics policy development, leadership training, ethical dilemma evaluation training) that leaders draw upon to aid in that
moral facilitation.
The existence of ethics codes, decision-making
processes and organizational resources are certainly
important factors to consider when developing an
ethics program; however, we believe ethical leadership is also necessary to complement these factors
when seeking to establish an ethical organizational
culture. Previous studies have shown that leaders can
have a positive or negative effect on subordinate
decision making, depending on whether the leader is
perceived as ethical and trustworthy or unethical and
untrustworthy (Jones and Kavanagh, 1996; Korsgaard et al., 2002; Schwarz, 2001). Jones and Kavanagh (1996) found that subordinates reported higher
unethical behavior intentions when their supervisors
were perceived as engaging in unethical behavior
than when supervisors were perceived as not
engaging in unethical behavior, showing that the
role of leadership is significant in influencing moral
intentions.
According to McDonald and Nijhof (1999),
ethics programs are likely to be perceived as
effective when leaders encourage ethical dialogue,
create an environment of trust and provide organizational resources to ensure that ethical decisions
are made. With this in mind, we assert that ethical
leadership is another important factor that affects
employee perceptions of ethics program effectiveness:
H4: There will be a positive relationship between perceptions of ethical leadership and perceptions of ethics
program effectiveness.
Method
Participants
A total of 1000 employees in a southern California
government agency were randomly selected to participate in the survey process. Out of 925 valid
surveys delivered, a total of 418 responded at a
response rate of 45.2%. This response rate compares
quite favorably to average response rates of 20–30%
reported in recent studies (Griffis et al., 2003; Hayes
and Kearney, 2001).
Of the respondents, 62.2% were female. The
mean age of participants was 45 years (sd = 10.10).
The length of time employed by the agency ranged
from less than one month to 40 years
(mean = 9.5 years, sd = 8.5).
Measures
A 37-item Perceptions of Ethical Climate questionnaire was embedded in a larger survey administered
by the researcher and the agency. Seven items were
taken from the Ethics Environment Questionnaire
(McDaniel, 1997) and were revised for the purpose
of this study. The Perceptions of Ethical Climate
assessment consisted of eight scales and was developed by the authors to measure perceptions of
ethics program effectiveness (a full list of the items
created for this study is provided in Appendix A).
All items were presented on a seven-point Likert
scale (1 = strongly disagree, 7 = strongly agree)
with higher values representing higher levels of
agreement. Cronbach’s (1951) coefficient alpha (a),
an index of the internal consistency of scale items
and a useful estimate of reliability, was calculated
on each scale.
To measure perceptions regarding organizational
level conditions of the model, the Ethics Code
Awareness Scale included six items (a ¼ :82), and
the Perceptions of Ethical Decision Making Processes Scale contained two items (a ¼ :55). The
Perceptions of Ethical Resources Scale was composed of three subscales. The first subscale measured
availability of time and included three items
(a ¼ :65). The second subscale measured perceptions of sufficient organizational financial resources
(a ¼ :90) and contained four items, and the third
Ethics Program Effectiveness
subscale measured ethical information provided by
the organization and contained three items
(a ¼ :83). Perceptions of Informal Ethical Norms
were measured using a 5-item scale (a ¼ :82). The
scales measuring Perceptions of Ethics Program
Effectiveness and Ethical Leadership contained four
items (a ¼ :79) and 10 items (a ¼ :90), respectively.
The measurement scales were piloted with 30
employees in the professional, administrative, and
exempt bargaining units. In total, 15 managers
provided qualitative comment on item clarity.
Procedure
The questionnaire was distributed to a participant list
generated by the payroll department using a random
seed algorithm. There were two methods of distribution: paper and pencil and web-based. Participants
who did not have access to the agency’s intranet
received a paper copy of the survey via interoffice
mail and were instructed to mail the survey back to
the researcher via confidential interoffice mail. As
there were two modes of survey administration, ttests were conducted to determine if there were
significant differences between modes of survey
administration on the dependent or predictor variables. A significant difference was found between
modes of administration on one subscale, decision-
making procedures. Participants who completed the
survey online perceived the organization to have
suitable decision-making processes more often than
those who completed the paper and pencil version.
To control for this difference, method of survey
administration was entered in the first step of the
model.
Results
Variable means, standard deviations and intercorrelations are displayed in Table I. We performed
hierarchical regression to control for the effects of
demographic differences while assessing the main
effects of the organizational preconditions and ethical leadership on ethics program effectiveness. Following Cohen et al. (2003), predictors were
centered before they were entered into each
regression equation. Although perceptions of informal ethical norms and ethical leadership were highly
correlated, they did not meet the criteria for multicollinearity (Tabachnick and Fidell, 2001). Ethics
code awareness, decision-making processes, availability of resources (information, time and money),
and ethical leadership were regressed against perceptions of ethics program effectiveness. For analysis,
a five-step hierarchical regression was performed.
Demographic variables and method of survey
TABLE I
Variable means, standard deviations, and intercorrelations
Variable
1.
2.
3.
4.
5.
5.
7.
8.
9.
10.
11.
12.
Gender
Age
Years of employment
Method
Awareness
Dec. making
Info
Time
Money
Informal
Ethical leadership
Ethics program effectiveness
M
sd
1
45.00 10.10 ).15**
9.45 8.46 ).06
.19**
28.80 7.23 .05
10.39 2.65 .08
12.04 3.50 .01
14.43 3.64 ).06
14.18 5.50 ).05
18.60 6.35 ).10*
43.28 12.64 ).08
16.25 3.93 .06
2
3
4
5
6
7
.36**
).01
.01
.01
.03
.09*
.01
.09*
.07
.14**
.09*
).08
).08
).09*
.01
).11*
).07
).09*
).05
.04
.12*
.07
.11*
).02
).04
.03
).11*
.68**
.56**
.26**
.51**
.56**
.60**
.45**
.50**
.29**
.42**
.50**
.63**
.42**
.30**
.49**
.50**
.53**
.56**
8
9
10
11
.33**
.43** .77**
.43** .74** .84**
.26** .66** .65** .63**
Note: *p<.05, **p<.01. Gender was coded as follows: 0 for male, 1 for female. Method of survey administration was
coded 1 for paper and pencil and 2 for web-based.
Kathie L. Pelletier and Michelle C. Bligh
uted to age (b ¼ :19) than to method of administration (b ¼ :12).
The second set of variables entered in the model
suggests a significant relationship between the three
organizational preconditions and perceptions of
ethics program effectiveness. After the demographic
variables were partialled out, perceptions of organizational preconditions accounted for 50% of the
variance in perceptions of ethics program effectiveness. Examination of individual predictors indicates
that Hypothesis 1a was not supported: awareness of
formal ethics codes did not significantly add to the
prediction of ethics program effectiveness. Hypothesis 2a was supported, however; perceptions of
suitable decision-making processes significantly
predicted perceptions of ethics program effectiveness
(b ¼ :11).
With regard to availability of organizational
resources, standardized coefficients indicated variance in perceptions of effective ethics programs was
attributed to organizational financial stability or
money (b ¼ :49) and the availability of information
on ethical decision making (b ¼ :29), showing
support for two of the three model preconditions
posited in Hypothesis 3. Availability of time did not
significantly predict perceptions of ethics program
effectiveness.
administration were entered in the first step, with
organizational preconditions (ethics code awareness,
decision-making processes, and availability of resources) entered in the second step. In the third step,
ethical leadership was entered. Perceptions of
informal ethical norms was entered in the fourth
step, as it was considered to be a distinct factor that
would add beyond the organizational preconditions
and ethical leadership to the prediction of our outcome variable. In the final step, the multiplicative
factors (the interaction of awareness of formal ethics
code with informal norms and the interaction of
decision making with informal norms) were entered
to assess for possible moderator effects.
Regression analysis: ethics program effectiveness
Results of the first step of the regression analysis (see
Table II) indicate that demographic variables
significantly predicted perceptions of ethics program
effectiveness (F4,347=4.56, p <.01), but accounted
for only 5% of the variance. Age and method of
survey administration significantly predicted perceptions of effective ethics program, but gender and
length of time employed did not. Standardized
coefficients indicated slightly more predictability in
perceptions of effective ethics programs was attrib-
TABLE II
Relationships between employee demographics, organizational conditions, and ethical leadership
on perceptions of ethics program effectiveness
Step
Hypothesis
1
2
3
4
5
1a
2a
3
3
3
4
1b
2b
Predictor
R
R2 added
b
SEb
b
Gender (F=0, M=1)
Age
Length of employment
Method
Ethics code awareness
Decision making
Information
Time
Money
Ethical leadership
Informal ethical norms
Awareness informal
Decision making informal
.22**
.05**
.75***
.50***
.76***
.76***
.76***
.02***
.01**
.01
.82
.67
)3.981E-03
)1.03
).15
.41
1.15
1.118E-02
1.90
.88
.78
.32
)1.11
.44
.20
.01
.46
.21
.20
.19
.15
.17
.25
.28
.20
.20
.10
.19**
).11
).12*
).04
.11*
.29***
.01
.49***
.23***
.20**
.09
).03
Note: N=356; *p<.05; **p<.01; ***p<.001; cumulative R squared = .57 (adjusted R squared = .55).
Ethics Program Effectiveness
Ethical leadership was entered in the third step of
the model, and support was found for Hypothesis 4.
Perceptions of ethical leadership added significantly
to the prediction of ethics program effectiveness
beyond the organizational conditions identified by
McDonald and Nijhof (1999). The contribution of
ethical leadership was significant in predicting perceptions of ethics program effectiveness, accounting
for an additional 2% of the variance.
Informal ethical norms was entered in the fourth
step of the model and added significantly to the
prediction of ethics program effectiveness. Beyond
the contribution of demographics, organizational
preconditions and ethical leadership, perceptions of
informal ethical norms accounted for an additional
1% of the variance in perceptions of ethics program
effectiveness.
Hypothesis 1b posited an interaction between
ethics code awareness and informal norms on perceptions of ethics program effectiveness. Hypothesis
2b posited an interaction between perceptions of
ethical decision-making processes and informal
norms on perceptions of ethics program effectiveness. In the final step, multiplicative factors (awareness of formal ethics codes informal norms and
decision making informal norms) were added. No
support was found for these two hypotheses. Perceptions of informal ethical norms did not moderate
perceptions of program effectiveness with regard to
ethics code awareness and decision-making processes.
Discussion
The primary purpose of this study was to determine
if the organization-level conditions specified in
McDonald and Nihof’s (1999) model were perceived to be salient in an organization attempting to
re-establish social legitimacy by implementing an
ethics program in response to external pressures.
Further, we sought to determine if perceptions of
ethical leadership would significantly predict
employees’ perceptions of ethics program effectiveness beyond the presence (or absence) of these
conditions. The importance of congruence between
formal stated policy and informal norms, as well as
decision-making processes and corresponding
informal norms, was also examined.
The age of the participant contributed significantly to the prediction of ethics program effectiveness. Employees who were older perceived the
organization’s ethics program as more effective than
younger employees, suggesting that older workers
may be more inclined to give a new program a
chance before formulating judgment. Since age and
length of employment tend to be positively correlated, older employees who have experienced
organizational consequences of ethical misconduct
might have a better appreciation of attempts to rebuild public trust through the formation of an ethics
program.
Method of survey administration also contributed
to the prediction of program effectiveness.
Respondents of the online method of distribution
had more favorable perceptions of ethics program
effectiveness than those who completed the paper
and pencil survey (primarily field staff).
No support was found for the main effect posited
in Hypothesis 1a. Awareness of formal ethics codes
was not significantly related to perceptions of ethics
program effectiveness. This finding is consistent with
Nwachukwu and Vitell’s (1997) study that found no
significant differences in ethical evaluations in
organizations with formal ethics codes and those in
organizations without ethics codes. In this sample,
stated expectations regarding ethical behavior were
not sufficient in influencing employee attitudes
about ethics program effectiveness.
Hypothesis 2a was supported. Perceptions of
ethical decision-making processes were a significant
contributor to the prediction of ethics program
effectiveness. Hunt and Vitell’s (1986) and
McDonald and Nijhof’s (1999) models suggest
decision makers should be exposed to training on
evaluation and should be aware of available alternatives to assist them in their decision-making processes. It is possible that members in this sample
viewed the organization as having alternatives
available to them. This agency’s ethics resources
office provides ethical decision-making guidelines
on its website and also in payroll stuffers so every
employee (whether working in the office or out in
the field) has access to decision-making guidelines.
Partial support was found for two of the three
organizational resources presented in Hypothesis 3.
Both financial stability and information were significant predictors of ethics program effectiveness
Kathie L. Pelletier and Michelle C. Bligh
ratings. Employees who perceived the organization
as having the financial stability to forego unethical
decision making also perceived the organization’s
ethics program to be effective. This finding was
consistent with Hoffman et al.’s (1998) finding that
unethical decision making is more prevalent when
the participants perceive the organization as relying
on the decision to survive. Participants who believed
that the organization had sufficient financial resources also perceived the ethics program to be more
effective.
Likewise, employees who felt that the organization provided information to guide ethical decision
making had more positive perceptions of ethics
program effectiveness than employees who felt that
the organization did not provide sufficient information. This finding supports the notion that an
ethics office that regularly provides information for
evaluating alternatives while simultaneously providing an outlet for voicing ethical concerns positively
affects employees’ beliefs about program effectiveness (McDonald and Nijhof, 1999).
We predicted a positive relationship between
availability of time and perceptions of ethics program
effectiveness. This relationship was not supported.
Having sufficient time to evaluate ethical dilemmas
was not related to positive perceptions of ethics
program effectiveness. It is possible that employees
perceived availability of time as a construct of the
job, not necessarily the ethics program intervention.
Hypotheses 1b and 2b posited that informal
norms would strengthen the relationships between
two organization-level preconditions (perceptions of
ethics code awareness and decision-making processes) and perceptions of ethics program effectiveness. Informal norms that are supportive of ethical
behavior were significant in predicting perceptions
of ethics program effectiveness, but the interaction
between this variable and code awareness and decision making did not achieve significance.
Hypothesis 1b posited that informal ethical norms
would strengthen the relationship between ethics
code awareness and perceptions of ethics program
effectiveness. Informal norms did not moderate
perceptions. As this organization was involved in an
ethical scandal that has been highly publicized during
the previous six years, it is possible that employee
perceptions of informal norms have not improved
with regard to communicating ethical expectations.
This finding might also be attributed to the perceived incongruence between written policy and
informal norms in the organization. An elected
political official in this organization remains an active
figurehead even though indicted on several counts
of bribery, thus vividly illustrating the consequences
of an organization not ‘‘walking the talk.’’
Hypothesis 2b predicted that informal norms
would strengthen the relationship between perceptions of ethical decision-making processes and ethics
program effectiveness. The lack of a significant
interaction might indicate that employees do not feel
comfortable in participating in ethical deliberations,
or the employees may not be encouraged to evaluate
ethical dilemmas with their superiors. This result
may seem surprising in light of the significant effect
of ethical leadership. One possible explanation might
be the nature of the bureaucratic environment of this
agency. Since the ethical misconduct was discovered, every contract the agency executes that is
$25,000 or more must be brought before the board
for approval, thus limiting the opportunity for lower
level employees to be involved in ethical deliberations.
Limitations and implications for future research
There were several limitations in this study. First, the
data were obtained using self-report measures and
the correlations may have been somewhat inflated by
the use of a single method. Future studies should
complement these measures with others obtained
with different methods, such as interviews, observation, and longitudinal survey measures.
The second limitation in this study is a lack of
generalizability; the sample in this study consisted of
418 employees within one public sector agency.
Although we examined 16 different bargaining units
across 30 different departments, a representative
sampling across multiple public and private entities
was not possible. Future studies should examine
differences in employee perceptions based on other
organizational variables such as department, hierarchical level, subculture, etc.
An additional limitation of our study is one that is
prevalent in ethics research. There is a lack of
appropriate measurement tools that assess the constructs specified in many of the theoretical models
Ethics Program Effectiveness
that have been developed. Validation of these newly
developed scales is an important direction for future
research. Finally, as with any cross-sectional correlational or regression analysis, causality cannot be
inferred. We were interested in how employees
perceived leadership, organizational norms, and
ethics program effectiveness, and we found a relationship between perceptions of organizational
conditions and subjective evaluations of ethics program effectiveness. While our data reflect employees’ perspectives, rather than completely objective
accounts of reality, this methodology is appropriate
for our primary interest in how employees themselves perceive and evaluate the ethical characteristics of their organizations. Employee data can
provide an important baseline from which to evaluate changing perceptions after implementing ethics
interventions, and can be used to examine the longitudinal development of effective programs over
time. It is important to point out that the results of
this study cannot be used to infer that these conditions will reliably predict other, arguably more
objective, measures of program effectiveness (e.g.,
decreases in litigation against a given organization);
however, when seeking to re-establish social legitimacy and employee trust, an examination of employee perceptions is a critical step.
In today’s business arena, an organization’s reputation matters as never before, and maintaining a
positive reputation has perhaps never been more
difficult. The present decade differs from decades
past: public expectations are higher, regulatory
agencies are stiffening codes, psychological contracts between employees and leadership are not as
strong as they once were, and some senior executives are facing jail terms. In response to these
events, an increasing number of organizations, both
public and private, are creating internal programs
and policies to help employees make ethical business decisions.
McDonald and Nijhof (1999) proposed a model
that offered a menu of organizational conditions that
must exist for an ethics program to be perceived as
effective. These conditions are certainly not
exhaustive. In addition to identifying the organiza-
tional ingredients for a successful ethics intervention,
an examination of characteristics of ethical leadership, as perceived by followers, was also noteworthy.
Leaders shape and embed organizational culture
(Schein, 1985), and influence employees through
their own behaviors, values, and expectations.
Employees look to their leadership to provide
direction and support, especially during times of
organizational or market uncertainty, which is when
ethical dilemmas are most likely to surface.
The results of this study are important for determining the organization-based factors that are perceived as most salient to employees in organizations
that are in the process of developing ethics programs,
either in response to external pressure, or as a proactive strategy for establishing or maintaining social
legitimacy. It is important to identify organization
level conditions that must exist to stimulate morally
responsible behavior. Further, in organizations that
are seeking to transform culture from one of mistrust
to one of trust, it is also noteworthy to mention the
conditions that must be mitigated (e.g., cynicism) to
promote an ethical culture.
Last, the importance of congruence between
formal and informal norms will guide ethics officers
and administrators in training leaders to become
better role models for ethical behavior. We hope
that the results of this research will provide valuable
insights for other organizations in their quest to
develop effective ethics programs either as a preventative measure or in response to external pressures for more responsible and ethical behavior.
Acknowledgements
The first author wishes to acknowledge the assistance of
Jan Kottke with regard to scale development and statistical analyses. We also thank Dena Smith, Kendall
Kerekes, James Pesta, and Tom Mathers for their technical and advisory support throughout this study. Finally, we also thank the editor and the two anonymous
reviewers for their insights and thoughtful comments.
An earlier version of this paper was presented at the
2004 Annual Meeting of the Academy of Management
in New Orleans, LA.
Kathie L. Pelletier and Michelle C. Bligh
APPENDIX A
Perceptions of ethical climatea
Ethics code awareness
1. When a decision has ethical implications, the organization’s ethics policy guides me in my decision-making process
2. I have read the organization’s ethics code
3. I understand what the organization expects of me in terms of ethical behavior
4. I understand the content of the ethics code
5. When I was hired, the ethical expectations of the organization were communicated to me
6. Policies exist that describe how the organization expects its employees to make ethical decisions
Perceptions of ethical decision-making processes
1. When faced with an ethical conflict at work, I seek guidance to determine possible consequences of my decision
2. When faced with making a decision that has an ethical implication, I feel I can discuss the matter with my immediate
supervisor
Perceptions of ethical resources scale
A. Information
1. There is an Ethics Resources Office available to me if I want to ask questions about ethics
2. It is easy to get help from the Ethics Resources Office
3. The ethics officer is available when I need help
B. Time
1. In the course of my workday, I have felt time pressures that have led to unethical decision making (R)
2. In this organization, there are many instances where ethical decision making is sacrificed due to time constraints (R)
3. Time pressures affect my ability to thoroughly evaluate ethical dilemmas (R)
C. Money
1. This organization makes ethical decisions even in times of budgetary constraints
2. This organization is willing to do the right thing even if it costs more money
3. This organization makes ethical decisions even if it might result in reduced funding
4. This organization will do the right thing no matter the financial costs
Perceptions of informal ethical norms
1. The organization rewards employees who exhibit ethical behavior
2. Personnel decisions (hiring and promotion) in this organization reflect ethical principles
3. In my opinion, employee concerns about ethical issues are not ‘‘heard’’ in my department (R)
4. If I reported a colleague for an ethical violation, there would be retaliation against me (R)
5. If I were to have an ethical concern, I know I would be supported in this organization
Perceptions of ethical leadership
1. The top leadership of this organization is concerned with ethical practice
2. I feel comfortable consulting with my immediate supervisor when I have to make a tough ethical decision
3. Top leadership places an equal value on productivity, quality, and ethical practice
4. Moral concerns are given top priority by the organization’s top leaders
5. My immediate supervisor sets a good example of ethical behavior
6. Top leadership works quickly to resolve ethical issues
7. My immediate supervisor looks the other way when employees make unethical decisions (R)
8. Top leadership provides employees with ethical guidance when it is needed
9. The organization’s top leadership routinely strives to make decisions that are ethical
10. If I reported one of my fellow employees for an ethics violation, my immediate supervisor would support me
Ethics Program Effectiveness
APPENDIX A
Continued
Perceptions of ethics program effectiveness
1. The Ethics Resources Office handles concerns and inquiries in a confidential manner
2. The creation of an Ethics Resources Office has increased my trust in the organization
3. The organization instituted the Ethics Resources Office because it is truly concerned about ethical standards
4. The Ethics Program is effective
a
Note: Respondents indicated their level of agreement with all items on the following Likert scale: ‘‘1’’ = Strongly
disagree, ‘‘2’’ = Disagree, ‘‘3’’ = Somewhat disagree, ‘‘4’’ = Neither agree or disagree, ‘‘5’’ = Somewhat agree,
‘‘6’’ = Agree, and ‘‘7’’ = Strongly agree. Items designated with (R) were reverse coded.
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Kathie L. Pelletier
School of Behavioral and Organizational Sciences
Claremont Graduate University
123 East Eighth Street, Claremont
CA, 91711, U.S.A.
E-mail: kathie.pelletier@cgu.edu