ethical climate

20 Academy of Management Perspectives November

A R T I C L E S

Ethical Climates and Their Effects on OrganizationalOutcomes: Implications From the Past andProphecies for the Futureby Aditya Simha and John B. Cullen

Executive OverviewEthical climate theory was first proposed by Victor and Cullen (1987, 1988). Ever since, it has been usefulin increasing our knowledge on a variety of organizational outcomes such as workplace bullying, organi-zational commitment, ethical behavior, job satisfaction, and turnover intentions. In this paper, wescrutinize the extant research on ethical climates to provide an understanding of what has been observedthus far, and what else ethical climate theory could be hamessed to examine. We also provide a critiqueof the ethical climate theory literature base and suggest a future research agenda for ethical climate theory.

First proposed by Victor and Culleri (1987, 1988),ethical climate theory (ECT) was initially con-ceptualized as an analytic tool for understanding

organizational normative systems. There was an ur-gent need at that time to develop such a tool (Victor& Cullen, 1988), stemming from the then-nascentbelief that organizations were social actors and con-sequently responsible for the ethical or unethicalbehaviors of their employees.

Organizational work climates (Schneider,1983) comprise the base upon which ECT wasestablished. An organizational work climate is de-fined as the shared perceptions of procedures, pol-icies, and practices, both formal and informal, ofthe organization (Reichers &. Schneider, 1990;Schneider, 1975, 1983). There are many workclimates: innovation climates (e.g., Agrell &Gustafson, 1994; Klein &. Sorra, 1996), creativityclimates (e.g., Gilson &. Shalley, 2004; Mumford,Scott, Gaddis, &. Strange, 2002), communicationclimates (Forward, Czech, & Lee, 2011; Guzley,

1992), warmth and support climates (e.g.. Field &Abelson, 1982), diversity climates (e.g., McKay,Avery, &. Morris, 2009), justice climates (e.g.,Dietz, Robinson, Folger, Baron, &. Schultz, 2003;Liao &. Rupp, 2005), involvement climates (e.g.,Chen, Lam, & Zhong, 2007; Richardson &. Van-denberg, 2005), and safety climates (e.g., Hof-mann & Mark, 2006; Hofmann & Stetzer, 1998;Zohar, 2010).

All these different work climates are known toinfluence behaviors of organizational actors to agreat degree (Martin &. Cullen, 2006; Tsai &

. Huang, 2008; Wimbush & Shepard, 1994). Ethi-cal climates are a subset of these organizationalwork climates and also have a strong influence onseveral organizational outcomes. An ethical cli-mate can be defined as the perception of whatconstitutes right behavior, and thus becomes apsychological mechanism through which ethicalissues are managed (Martin &. Cullen, 2006,p. 177). Ethical climates influence both decision

* Aditya Simha ([email protected]) is an Assistant Professor of Organizational Leadership at Gonzaga University.John B. Cullen ([email protected]) is a Professor and Huber Chair of Entrepreneurial Studies at Washington State University.

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2012 Simha and Cullen 21

making and behavioral responses to ethical dilem-mas, which then go on to be reflected in variouswork outcomes.

Ethical transgressions at and involving organi-zations—such as insider trading, embezzlement,corporate fraud, and workplace bullying—can allbe traced back to the influence of ethical workclimates (Arnaud, 2010), which were at the cen-ter of recent ethical scandals at once-respectedorganizations such as AIG, Countrywide Finan-cial, Lehman Brothers, and Siemens AG (Arnaud&. Schminke, in press). The importance of ECT forboth research and practice is underscored when oneexamines the different and frequent cases of ethicaltransgressions in organizations, especially in light ofthe various workplace outcomes influenced by ethi-cal climates (e.g., Bulutlar & Oz, 2009; Fu & Desh-pande, 2012; Jaramillo, Mulki, & Boles, in press;Laratta, 2011; Wang & Hsieh, 2012).

We begin with an overview of the theoreticalbackground of ECT and then present a detailedliterature review. Next we present our critique ofECT and provide suggestions for future areas of re-search that could be explored to further contributeto ECT.

Ethical Climate Theory

Victor and Cullen (1987, 1988) developed ECTby combining Kohlberg's (1984) work onmoral development and Schneider's (1983)

work on sociocultural theories of organization.The original Victor and Cullen (1988) frameworkconsists of a two-dimensional model of ethicalclimate types, considering ethical philosophy andthe sociological theory of reference groups.

The ethical philosophy dimension includes threecriteria: egoism, benevolence, and principle. Egoism re-fers to behavior that is concerned chiefly with self-interest. Benevolence is similar to utilitarianism, inthat decisions and actions are taken to produce thegreatest good for the greatest number of people.Principle is similar to deontology, in that decisionsare made and actions are taken in accordance withlaws, rules, codes, and procedures. These three eth-ical criteria compose the ethical philosophy dimen-sion of the ECT framework.

The sociological theory dimension also in-cludes three loci: individual, local, and cosmopoli'

tan. They refer to individuals making decisionsbased on their own personal beliefs and values, theorganization itself, and the community or societyexternal to the organization.

The intersections of these two theoretical dimen-sions of ethical climate result in nine theoreticalclimate types (see Figure 1): self-interest, companyprofit, efficiency, friendship, team interest, social re-sponsibility, personal morality, company rules andprocedures, and laws and professional codes.

Five Empirically Occurring EthicalClimate Types

These nine ethical climates, while theoreticallypossible, are not all equally likely to occur.Empirically, five types of ethical climate occur

most often (Bulutlar & Oz, 2009; Martin & Cul-len, 2006; Tsai & Huang, 2008): instrumental,caring, independence, law and code, and rules (seeFigure 2). These empirically occurring types ofethical climates originate from the nine theoreti-cal climate types and straddle multiple loci ofanalysis. For instance, instrumental climates couldbe concerned with both self-interest and companyprofit.

Instrumental climates are associated with theegoism construct and the individual and local loci ofanalysis. As such, employees operating in instrumen-tal climates tend to see their organizational unit ashaving norms and expectations that encourage eth-ical decision making from an egoistic perspective.Behavior that promotes self-interest is the normeven to the possible detriment of others.

Caring climates are associated with the benev-olence construct and the individual and local lociof analysis; employees operating in caring climatesperceive that their decisions are and should bebased on an overarching concern for the well-being of others. This climate tends to encouragebehaviors that yield a positive outcome for thegreatest number of constituents.

Independence climates are associated with theprinciple construct and the individual locus of anal-ysis; employees believe that they can act on deeplyheld personal convictions to make ethical decisions.TTiese climates emphasize personal moral beliefswith minimal regard for external influences.

22 Academy of Management Perspetíives November

Figure 1Theoretical Strata off Etiiical Climate (Victor & Cullen, 1987,1988)

Locus of Analysis

Ethical Theory

Egoism

Benevolence

Principle

Individual

Self-interest

Friendship

Personal morality

Local

Company profit

Team interest

Company rulesand procedures

Cosmopolitan

Efficiency

Socialresponsibility

Laws andprofessionalcodes

Figure 2Five Common Empirical Derivatives off Ethical Climate (Victor & Cullen, 1987,1988)

Locus ofAnalysis

Ethical Analysis

Egoism

Benevolence

Principle

Individual

Instrumental

Caring

Independence

Local

Instrumental

Caring

Rules

Cosmopolitan

Law and Code

Rules climates are associated with the principleconstruct and the local locus of analysis. In theseclimates, organizational decisions are perceived asbeing guided by a strong and pervasive set of localrules or standards, such as codes of conduct ( Appel-baum, Deguire, & Lay, 2005; Aquino &. Becker,2005; Liu, Fellows, & Ng, 2004; Martin & Cul-len, 2006).

Law and code climates are associated with theprinciple construct and the cosmopolitan locus of

analysis; principled decision making is based onexternal codes such as the law, the Bible, or pro-fessional codes of conduct.

ECT Literature Review

As mentioned above, ECT has been used in avariety of ways since it was first formulatedand proposed by Victor and Cullen (1987,

1988). Some research studies have examined theantecedents of ethical climates, but most of the


literature base on ECT has explored the effects ofethical climates on organizational outcomes.

Antecedents of Ethical Climates

This segment of the literature base on ECT fo-cuses primarily on external organizational con-text, organizational structure, and strategic ormanagerial orientations. External organizationalcontext emanates from institutional theory(DiMaggio & Powell, 1983), and essentially dealswith organizations trying to legitimize themselvesin response to external pressures. Although fewstudies investigate how external organizationalcontexts and ethical climates interact, one thatdoes is Bourne and Snead's (1999) exploration ofhow community norms and values determine em-ployees' ethical perceptions, and hence determinethe organizational ethical climates. Another suchstudy by Cullen, Parboteeah, and Hoegl (2004)investigated how external organizational contextaffected ethical decision making. Similarly, Belakand Mulej (2009) found that ethical climateschange over the life cycle stages of an enterprise.Another recent study by Weber and Gerde (2011)found that both organizational role and environ-mental uncertainty influenced ethical climates inmilitary units.

The original study by Victor and Cullen (1988)found that organizational form was a significantpredictor of ethical climate perceptions. They hy-pothesized that Ouchi's (1980) transaction orga-nizational forms were responsible for encouragingvarious types of ethical climates. A study by Wim-bush, Shepard, and Markham (1997) also foundthat various organizational forms encouraged sev-eral kinds of ethical climates. Similarly, Wyld andJones (1997) proposed that organizational contextfactors were very important in establishing ethicalclimates. Stone and Henry (2003) investigatedthe development of ethical climates from an in-formation technology (IT) perspective, and foundthat IT influenced the development of varioustypes of ethical climates. Similarly, Jin,Drozdenko, and Bassett (2007) found that organi-zational structure in IT organizations affected thedevelopment of ethical climates there.

Several studies have investigated ethical cli-mates in a nonprofit versus profit context (Agar-

wal & Malloy, 1999; Agarwal, Malloy, & Rasmus-sen, 2010; Brower &L Shrader, 2000). This realmof research has found that nonprofit organizationstend to encourage different types of ethical cli-mates than do for-profit or government organiza-tions (e.g., Agarwal et al, 2010). A recent study(Duh, Belak, & Milfelner, 2010) investigated dif-ferences between family and nonfamily enterprisesin terms of ethical climates. Kidwell, Kellermanns,and Eddleston (2012) also studied family firmsand investigated the role of conflict and justiceperceptions in the development of ethicalclimates.

Another realm of research exploring the anteced-ents of ethical climates has focused on strategic andmanagerial orientations. One study examined therelationship between strategic and managerial orien-tations and ethical work climates (VanSandt,Shepard, & Zappe, 2006). Another study by Parbo-teeah, Chen, Lin, Chen, Lee, and Chung (2010)examined the role of managerial practices in estab-lishing ethical climates, and found that practicessuch as communication and empowerment influ-ence ethical climates from a functional perspective.Several studies have investigated the role of leadersin establishing ethical climates (Dickson, Smith,Grojean, & Ehrhart, 2001; Grojean, Resick, Dick-son, &. Smith, 2004; Upchurch &. Ruhland; Wim-bush &. Shepard, 1994). Leadership orientationshave also been considered as an explanatory variablefor the establishment of ethical climates (Schminke,Ambrose, & Neubaum, 2005), as have entrepre-neurial orientations (Neubaum, Mitchell, &.Schminke, 2004). Managerial orientations have alsobeen found to influence organizational actors' per-ceptions of ethical climates (Martin &. Cullen, 2006;Schwepker & Hartline, 2005).

Effects of Ethical Climates

Most of the literature base on ethical climates hasconcentrated on exploring and investigating theeffects of ethical climates on various organiza-tional outcomes. The key premise behind thisproductive realm of research seems to be the re-alization that perceptions of ethical climates tapfundamentally important issues that affect peo-ple's reactions to work and their organizations(Martin & Cullen, 2006). However, most of this


literature has been published in business ethicsjournals, especially the Journal of Business Ethics,even though the outcome variables being investi-gated are traditional management and organiza-tional behavior variables such as job satisfaction,organizational commitment, turnover intentions,ethical behavior, and dysfunctional behaviors.

Job satisfaction is a popular outcome variablestudied by numerous scholars and studies in thecontext of ethical climates (e.g., Deshpande,1996b; Elci & Alpkan, 2009; Goldman & Tabak,2010; Joseph & Deshpande, 1997; Koh & Boo,2001; Martin & Cullen, 2006; Tsai & Huang,2008; Wang & Hsieh, 2012; Woodbine, 2006).This construct has been studied in a variety ofcontexts, including differing countries, employees,and industries. An early study by Deshpande(1996b) investigated the impact of ethical climatetypes on facets of job satisfaction, such as paysatisfaction, promotion satisfaction, coworker sat-isfaction, supervisor satisfaction, work satisfaction,and overall job satisfaction. He found that withthe exception of pay satisfaction, ethical climateswere associated with all other measures ofsatisfaction.

Another study by Joseph and Deshpande(1997) found that egoistic climates negatively in-fluenced nurses' satisfaction with their supervisors.A more recent study by Elci and Alpkan (2009)also found that egoistic climates were negativelyassociated with job satisfaction, whereas benevo-lent and principled climates were positively asso-ciated with job satisfaction. Similarly, Tsai andHuang (2008) asserted that organizational admin-istrators and managers try to foster benevolent andprincipled climates within organizations and pre-vent egoistic climates from developing. Essen-tially, what all this research suggests is that ego-istic climates (i.e., instrumental, self-interest,company profit, and efficiency) have a negativeassociation with work and job satisfaction,whereas benevolent climates and principled cli-mates have a positive association with work andjob satisfaction. A recent study by Wang andHsieh (2012) also found positive associations be-tween caring and rules climates and job satisfac-tion, and negative associations between instru-mental climates and job satisfaction. Table 1

provides a brief summary of some of these studieson ethical climates effects on job satisfaction.

Organizational commitment is another out-come variable considered by numerous scholars(e.g., Ambrose, Arnaud, &. Schminke, 2008; Cul-len, Parboteeah, &. Victor, 2003; DeConinck,2010; Jaramillo, Mulki, & Boles, in press; Martin&. Cullen, 2006; Ruppel & Harrington, 2000;Schwepker, 2001; Sims & Keon, 1997; Tsai &.Huang, 2008; Valentine, Godkin, & Lucero,2002; Wingreen, 2003). This construct has alsobeen studied in a variety of contexts. Sims andKeon (1997) investigated the effects of ethicalclimates on the person-organization fit, and con-cluded that persons whose ideal preferences ofethical climate matched with the actual ethicalclimate in their organizations were more likely tobe committed to their organizations. This partic-ular finding in terms of person-organization fitand ethical climate was verified by later studies(Ambrose et al., 2008; Valentine et al, 2002).Cullen and colleagues (2003) directly investigatedthe effects of ethical climate types on organiza-tional commitment and found positive associa-tions between benevolent and principled climatesand organizational commitment, and negative as-sociations between egoistic climates and organiza-tional commitment. They did, however, find thatprincipled climates were positively related to com-mitment only for professional workers, not fornonprofessional workers. As with job satisfaction,all the existing research suggests that benevolentand principled climates have positive associationswith organizational commitment, whereas egoisticclimates have negative associations with organi-zational commitment. Table 2 provides a briefsummary of some of these studies on ethical cli-mate effects on organizational commitment.

The research linking ethical climates and turn-over intentions has a very similar conclusion tothe commitment findings, chiefly that egoisticclimates tend to encourage turnover intentions(e.g., Ambrose et al, 2008; DeConinck, 2011;Lopez, Babin, & Chung, 2009; Mulki, Jaramillo,& Locander, 2008; Sims &. Keon, 1997; Stewart etal, 2011), and principled and benevolent climatestend to reduce employee turnover intentions. Ta-ble 3 provides a brief summary of some of these


Tahle 1Joh Satisfaction

AuthorsAmbrose etal. (2008)

Deshpande (1996a)

Elci&Alpkan(2006)

Goldman & Tabak(2010)

Joseph & Deshpande(1997)

Koh& Boo (2001)

Schwepker(2001)

Tsoi& Huong (2008)

Wong & Hsieh (2012)

Climate measureA16-item scole odopted from

Schminke etal. (2005) andVictor & Cullen (1988)

A 6-item scole odopted fromVictor & Cullen (1988)

A 38-item scole odopted fromSchwepker (2001 )ond Victor& Cullen (1988)

A 22-item scale adopted fromVictor & Cullen (1988) ondAcharya (2005)

A 6-item scale meosuring ECodapted from Victor & Cullen(1988)

A 26-item scole from Cullen et ol.(1993)

A 7-item scole bosed on Quolls &Puto (1989)

A 14-item scole odopted fromVictor & Cullen (1988)

A 26-item scole from Cullen et ol.(1993)

Sample

304 full-time employees

206 middle-levelmonogers

1,174 telecom employees

95 nurses

114 nurses

237 monogers

152solespersons

352 nurses


Key resultsA fit between employee morol development ond

ethicol climote is linked with higher levels of ¡obsatisfaction.

Professionoi ond coring climates were positivelyossocioted with job sotisfoction; instrumento!climotes were negotively ossocioted with jobsatisfaction.

Self-interest climotes were negotively ossocioted withjob sotisfoction; teom interest, sociolresponsibility, and law ond code climotes werepositively ossocioted with job sotisfoction.

Caring and low ond code climotes were positivelyossocioted with oil focets of job sotisfoction;instrumentol climotes were negotively associotedwith sotisfoction with the teom.

Caring climotes were positively reloted with both payond supervisor satisfaction; efficiency climoteswere negotively reloted with supervisorsotisfoction.

Principled ethicol climates were positively ossociotedwith job sotisfoction.

Positive ethicol climotes were positively associatedwith job sotisfoction ond orgonizotionolcommitment.

Caring climates were positively associoted with oilfocets of job sotisfoction; independence ond rulesclimotes were positively ossocioted with overoll jobsotisfoction. Instrumentol climates were negativelyassociated with overoll job sotisfoction.

Instrumentol climotes were negotively related to jobsotisfoction; coring and rules climates werepositively reloted to job satisfaction.

studies on ethical climate's effects on turnoverintentions.

An additional popular and important stream ofresearch has focused on the effects of ethical cli-mates on the ethical behavior of organizationalactors (e.g., Deshpande, 1996b; Deshpande & Jo-seph, 2009; Fu & Deshpande, 2012; Fritzsche,2000; Leung, 2008; Rothwell & Baldwin, 2007;Saini & Martin, 2009; Shacklock, Manning, &Hort, 2011; Smith, Thompson, &. Iacovou, 2009;Wimbush & Shepard, 1994).

Wimbush and Shepard (1994) were among the•first scholars to propose a model linking ethicalclimates with ethical behavior. In a subsequent

study, Wimbush and colleagues (1997) corrobo-rated the earlier model and found that ethicalclimate dimensions were related to ethical behav-ior. Deshpande (1996b) also found a link betweenethical climate and ethical behavior of successfulmanagers. This particular ñnding has been repli-cated in Polish, Russian, and Chinese contexts(Deshpande, George, & Joseph, 2000; Deshpande,Joseph, & Shu, 2011; Simha & Stachowicz-Stanusch, in press). Rothwell and Baldwin (2007)suggested that benevolent climates have a positiveassociation with employee willingness to engagein whistle-blowing. Parboteeah and Kapp (2008)also found a positive association with principled


Table 2Commitment

AuthorsAmbrose et al. (2008)

Cullen et al. (2003)

Ruppel & Harrington(2000)

Schwepker(2001)

Sims & Keon (1997)

Tsai & Huang (2008)

Climate measureA 16-item scale adapted from

Schminke et al. (2005) andVictor& Cullen (1988)

Both the 26-item and 36-itemscales from Cullen et al.(1993) and Victor & Cullen(1988)

A selection of a part of the 26-item Victor & Cullen (1988)scale

A 7-item scale based on Quails &Puto (1989)

A15-item scale adapted fromCullen et DI. (1993)

A14-item scale adapted fromVictor & Cullen (1988)

Sample


Study 1:411 employees; Study2:139 accountants

111 IT managers

152 salespersons

86 working students

352 nurses

Key results

A fit between employee moral development andethical climate was linked with higher levels oforganizational commitment.

Egoistic climates were negatively related tocommitment; benevolent climates were positivelyrelated to commitment. A positive relationshipbetween principled climates and commitment wasfound only for professional workers.

Benevolent and principled climates were positivelyassociated with organizational commitment.

Positive ethical climates were positively associatedwith job satisfaction and organizationalcommitment.

A fit between ethical preferences and ethical climatevalues was hypothesized as increasingcommitment, but was not supported.

Instrumental climates were positively associated withcontinuance commitment and negativelyassociated with affective commitment and overallcommitment. Caring and rules climates positivelyaffected normative commitment.

Tahle3Turnover

AuthorsAmbrose et al. (2008) .

Mulki et al. (2008)

Schwepker(2001)

Sims& Keon (1997)

Stewart et al. (2011)

Climate measureA16-item scale adapted from

Schminke et al. (2005) andVictor & Cullen (1988)

A 7-item scale adapted fromSchwepker (2001)

A 7-item scale based on Quails &Puto (1989)

A15-item scale adapted fromCullen et al. (1993)

A 2-item scale adapted from Koh& Boo(2001)

Sample304 full-time employees

212 healthcare employees

152 salespersons

86 working students

348 warehouse employees

Key resultsA fit between employee moral development and

ethical climate was linked with lower levels ofturnover.

Strong and positive ethical climates reduced rolestress and increased trust in supervisors.

Positive ethical climates were positively associatedwith job satisfaction and organizationalcommitment.

A fit between ethical preferences and ethical climatevalues reduced turnover intentions.

Ethical climates moderated the diversity climate andturnover intentions link such that turnoverintentions were lowest for workers perceiving both0 pro-diversity and high ethical climate.

climates and workplace safety behaviors. Smithand colleagues (2009) found that egoistic climateswere associated with project status misreportingwhereas principled climates were associated withless misreporting. However, Smith and colleagues(2009) did not find any association between be-

nevolent climates and misreporting. Bulutlar andOz (2009) found a positive association betweenegoistic climates and workplace bullying behav-iors and a negative association between principledclimates and workplace bullying behaviors. Ta-,ble 4 provides a brief summary of some of these


Table 4Ethical Behavior

V AuthorsArnaud & Schminke (in

press)

Deshpande (1996b)

Deshpande & Joseph(20091

Fritzsche (2000)

Leung (2008)

Parboteeah & Kapp(2008)

Rothwell & Baldwin(2007)

Saini &Mortin (2009)

Smith etal. (2009)

Wimbush etal. (1997)

Climate measure t , .A I 6-item scale adapted from

Schminke etal. (2005) andVictor & Cullen (1988)

A 6-item scale adapted fromVictor & Cullen (1988)


The 26-item scale from Victor &Cullen (1988)



The 36-item scale from Cullenetal.(1993)




; , : ; . ;À- iSani ip lé , ; - ' - . i - ' "648 employees

206 managers

103 nurses

241 employees

109 employees

237 manufacturingemployees

198 police officers and184 civilians

174 marketing executives

264 state governmentproject team members

525 retail storeemployees

j ' ; Key resultsEthical climate, collective moral emotion, and collective ethical

efficacy interact to influence ethical behavior.

People operating under caring climates perceived a positiveassociation between success and ethical behavior; the oppositewas true far people under instrumental climates.

Independence climates had a significant positive associatian withethical behavior.

Law and code and independence climates were associated withethical behavior. There was an equal likelihood of people ininstrumental climates either paying or not paying a bribe.

Instrumental and independence climates were associated withnegative extra-role behaviors; caring and law and codeclimates were associated with positive extra-role behaviors.

Principled climates and benevolent climates were negativelyassociated with injuries, and principled climates werepositively associated with safety-enhancing behaviors.

Friendship or team ethical climates had positive associations withwillingness to engage in whistle-blowing.

Egoistic climates were associated with lower risk-takingpropensity; benevolent climates were associated with higherrisk-taking propensity.

Rules climates were associated with less frequent misreporting;instrumental climates were associated with more frequentmisreporting.

Instrumental climates were positively associated with unethicalbehaviors; independence, caring, law and code, ond rulesclimates were negatively associated with unethical behaviors.

studies on ethical climate's effects on ethicalbehavior.

Dysfunctional behavior is another organiza-tional outcome variable investigated by severalECT smdies (Bulutlar & Oz, 2009; Martin &Cullen, 2006). Carr and colleagues (2004)stressed in their article that dysfunctional behav-ior needed to be studied more often by organiza-tional climate researchers. Various studies linkingethical climates with dysfunctional behavior havefound that benevolent and principled climates arethe best climates in terms of reducing employeedeviance and employee dysfunctional behaviors(Bamett & Vaicys, 2000; Bulutlar & Oz, 2009;Elm & Nichols, 1993; Martin & Cullen, 2006;Ozer & Yilmaz, 2011; Peterson, 2002; Vardi,2001; Watley, 2002; Wimbush et al., 1997). In asimilar vein, research has concluded that egoistic

climates are the worst ones in terms of encourag-ing employee dysfunctional behaviors (Martin &Cullen, 2006). Table 5 provides a brief summaryof some of these studies on ethical climate's effectson dysfunctional behavior.

The essential theme emerging from this streamof research is that benevolent and principled cli-mates (i.e., caring, independence, rules, and lawand code) are the climates associated with positiveoutcomes, and egoistic climates (i.e., instrumen-tal) are associated with a whole host of negativeoutcomes. Research (Cullen et al., 2003; Martin&. Cullen, 2006) has noted that particular types oforganizations tend to have particular ethical cli-mate types. For instance, organizations needing toadhere to a visible code of conduct and rules (suchas engineering, accounting, and law firms) aremore likely to have principled climates (either

28 Academy af Management Perspectives Navember

Table 5Dysfunctional Bebavior

AuthorsBarnett&Vaicys(2000)

Bulutlar &0z (2009)

Elm & Nichols (1993)

Peterson (2002)

Vardi(2001)

Climate measureThe 26-item scale from Victor &

Cullen (1988)



The 36-item scale from Cullenet al. (1993)


Sample207 marketing

professionals


243 managers

202 alumni


Key resultsIndividuals operating under rules climates were

less likely to engage in questionable sellingpractices even when they themselves did notfeel that the practices were unethical.Individuals operating under friendship climateswere more likely to engage in questionableselling practices when they felt that thepractices were unethical.

Instrumental climates were positively associatedwith bullying behaviors; rules, caring, and lawand code climates were negatively associatedwith bullying behaviors.

Managers differ in terms of their moral reasoningin principled climates as compared to managersin benevolent climates.

A higher frequency of unethical behavior wasfound in egoistic climates as compared tobenevolent and principled climates. A higherfrequency of unethical behavior was found incompanies without a code of conduct.

A significant negative relationship was foundbetween benevolent climates andorganizational misconduct. Frequency ofmisbehovior reported by managers wasnegatively related to rules, instrumental, andcaring climates.

rules or law and code). Firms that operate inconditions of high volatility and competitivenessare more likely to harbor egoistic climates. Thissuggests that organizations operating in the finan-cial trading sector are likely to have egoistic cli-mates in them. Similarly, organizations with asomewhat humanistic mission will be likely toharbor benevolent climates. For instance, organi-zations dealing with environmental motives—"green" organizations—may harbor benevolentclimates. However, this may vary from case tocase. For instance, one may encounter an account-ing organization that has a predominantly egoisticclimate (the case of Arthur Andersen seems onepossible example) rather than a principled cli-mate. In a similar vein, Venezia, Venezia, andHung (2010) found differences in the ethical cli-mates of public accounting firms as opposed toprivate-sector accounting firms in Asia. Theyfound that public accounting firms were more

likely to harbor principled climates than the pri-vate accounting firms.

However, judging from the evidence evincedby current research findings, it appears that orga-nizational leaders should strive to encourage andestablish benevolent and principled climates intheir organizations, while striving to prevent ego-istic climates from setting in.

A Critique of the Literature Base on ECT

One of the key themes emerging from the dis-tillation of the literature is that egoistic cli-mates are the least preferred type of climate,

as they have been linked with a variety of negativeand undesirable organizational outcomes. Con-versely, it appears that benevolent and principledclimates are much to be desired, as they have beenlinked with so many different positive and desir-able organizational outcomes. However, there area few inconsistencies in this otherwise robust lit-


erature base. We offer a critique of these incon-sistencies and suggest that some reframing couldchange some emergent themes.

Ethical Climate Questionnaire (ECQ)

One of the inconsistencies in ethical climate re-search is that authors have used very differentmeasures of ethical climate. The most popularinstrument is the ECQ formulated by Victor andCullen (1987, 1988). Respondents taking theECQ were asked to act as observers reporting onorganizational expectations, not their own per-sonal beliefs or their affective evaluations of theclimates. The original format contained 26 itemsand used a forced-choice six-point Likert scalemeasure. Cullen, Victor, and Bronson (1993) laterdeveloped a lengthier 36-item questionnaire tomeasure ethical climate. Both the 26-item and36-item questionnaires were demonstrated to bevalid and reliable by Cullen and colleagues (1993)and have heen used hy other scholars in theirresearch.

However, some studies have used a very shortsix-item scale to measure ethical climate types(Deshpande, 1996a, 1996b; Deshpande et al,2000, 2011; Joseph & Deshpande, 1997). A fewothers have used various shortened versions of theECQ. Some studies have not used Victor andCuUen's (1987, 1988) ECQ at all; their versions ofethical climate are often measured by very shortscales. For instance, Stewart and colleagues(2011) measured ethical climate using a two-itemscale. Schwepker (2001) dichotomized his mea-sure of ethical climate hy classifying ethical cli-mates as good ethical climates and had ethicalclimates. A measure pertinent to marketing re-search has been employed by several researchers(DeConinck, 2010, 2011; Jaramillo et al, in press;Lopez et al, 2009; Schwepker &. Hartline, 2005;Valentine, Greller, &. Richtermeyer, 2006). Thatparticular measure uses four scales measuring re-sponsibility/trust, peer behavior, ethical norms,and selling practices. However, in comparison tothe original Victor and Cullen scale, it lacks com-pleteness, and is much too specific to marketingand sales organizational contexts.

Similarly, there are a lot of differences in stud-ies in terms of Likert scale choices used (some used

four-point scales; some used five- or seven-pointscales). Another issue with some of these studies isthat several of them obtained different results intheir factor analyses, wherein the ECQ itemsdo not always load consistently (Smith et al,2009). This results in different scales heing used tomeasure the same construct (i.e., in some cases,only two items were used to create a scale forinstrumental climates, and in some cases, six itemswere used).

These inconsistencies in measuring ethical cli-mates suggest that in a few cases, perhaps whatwas studied were not the ethical climates proposedhy Victor and Cullen (1987, 1988). This led tosome difficulty in comparing results across studies.In our assessment, the Victor and Cullen frame-work seems to be superior to dichotomous mea-sures (i.e., good versus bad ethical climates) be-cause of the lack of explanatory power indichotomous measures. First, classifying an ethicalclimate as good or had does not provide any un-derstanding of unique effects of different climates,and second, the Victor and Cullen framework andmeasure allow one to study climates without as-signing positive or negative valuations. All ethicalclimate types can have positive or negative out-comes, so assigning good and had lahels to ethicalclimates is not helpful in advancing our knowl-edge. Dichotomous or short measures of ethicalclimates also do not consider the various ethicalcriteria that are used to establish ethical climatesin the first place.

Traditional Organizational Outcome Variables

As noted earlier, most of the literature on ECThas found negative consequences of egoistic cli-mates and positive consequences of benevolentand principled climates. One possible reason maybe that most studies have examined traditionalorganizational outcomes and have not venturedinto nontraditional outcomes.

For instance, it is possible that egoistic climateswould he positively associated with measures ofpersonal success. Most traditional outcome vari-ahles examined by researchers focus on outcomesbeneficial to organizations (such as commitmentand turnover intentions). However, if one were tofocus on a different variable—say, personal re-

30 Academy af Management Perspectives November

cords—one could hope to find a positive associa-tion between instrumental climates and an out-come variable that yields a net positive for anindividual. Similarly, if one considers the reverseof organizational commitment, one could claimthat instrumental climates encourage employeesto seek out better prospects for themselves (anemployee could seek out a more lucrative or ben-eficial job offer with another organization or in-traorganizational unit or group if the employee ismotivated by self-interest-seeking behavior).

In a similar vein, changing the outcome vari-able to a more nontraditional organizational be-havior outcome could yield different results forbenevolent and principled climates. For instance,it is possible that a pervasive benevolent climatemight prevent organizational leaders from makingdifficult decisions even when such decisions arenecessary. Similarly, a restrictive reliance on arules climate could result in an organization sti-fling its employees' urge to speak out on a moralissue or perhaps inhibit creativity or innovation.

Future Areas of Exploration

One future area of exploration to enhance ECTis the determination of contextual determi-nants of ethical behavior (Arnaud &.

Schminke, in press; Martin & Cullen, 2006;O'Fallon & Butterfield, 2005). Arnaud (2010)and Arnaud and Schminke (in press) have intro-duced a newer measure of ethical climate, theEthical Climate Index (ECI), which is a measureused to determine contextual determinants of eth-ical behavior. The ECI measures the dimensionsof collective moral sensitivity, collective moraljudgment, collective moral motivation, and col-lective moral character. More research on the ECIwould be a welcome next step. Similarly, moreresearch spanning multiple levels of analysis needsto be conducted to better understand contextualdeterminants of ethical behavior. An interestingarea in that regard stems from the informal econ-omy (Godfrey, 2011); perhaps ethical climatescould be studied in the context of informal-econ-omy enterprises. This would be particularly inter-esting because informal economies are prevalentin developing and undeveloped nations, andstudying ethical climates in the context of infor-

mal economies is bound to be important anduseful.

Another area of research that would perhapsbenefit practitioners and managers would be toestablish a clear and unambiguous schema forthe establishment and management of differentethical climates. It is not enough to just tellpractitioners that they need to encourage benev-olent and principled climates and discourage ego-istic climates; it is imperative that they be givenclear instructions on how they can foster andencourage some climates while discouraging oth-ers. A how-to guide would be invaluable for prac-titioners; currently, the research on ethical cli-mates does not seem to have such a guideavailable.

A third area of exploration would be, as wealluded to in our critique, to research some addi-tional organizational outcomes. Perhaps doing sowould allow one to see the possible merits ofegoistic climates and possible demerits of benev-olent and principled climates. Playing devil's ad-vocate may allow us to investigate other interest-ing relationships and discover potentiallyinteresting findings that previous ECT studieshave ignored. For instance, an independence cli-mate where employees are encouraged to act ontheir own deeply held moral convictions couldresult in potentially litigious scenarios. Consider,for example, a manager who is a deeply devoutand religious person. That manager may discrim-inate against a gay subordinate due to his or hersexual orientation, which would then result in anexpensive lawsuit against the organization. Simi-larly, some ongoing preliminary work has foundthat benevolent climates tend to be associatedwith increased rates of organizational corruption(Stachowicz-Stanusch & Simha, in press). Per-haps other studies could examine the associationof benevolent climates with other variables suchas bribery or whistle-blowing.

A fourth area of exploration would be to ex-pand intemational research in ECT, especiallycross-national and cross-cultural comparisons.Many of the ECT studies have been conducted ina variety of national contexts (e.g., the UnitedStates, China, Russia, and India), but very fewstudies (Kuntz, Kuntz, Elenkov, & Nabirukhina,

2012 Simba and Cullen 31

in press; Laratta, 2011; Weeks et al., 2006) haveconducted comparative cross-national or cross-cultural research in an ECT context. An expan-sion of such cross-cultural or cross-national workon ECT would have the additional benefit of alsoexpanding the international business literaturebase. This would also increase our knowledge baseon phenomena in countries that are rarely studiedby organizational researchers.

A final area of further exploration deals withdysfunctional behaviors and unethical behaviorsthat are largely uninvestigated (Martin & Cullen,2006). Litzky, Eddleston, and Kidder (2006) sug-gested that ethical climates could be used by man-agers to reduce workplace deviance. However, fewstudies have investigated dysfunctional behaviorsand ethical climates. One such study by Bulutlarand Oz (2009) investigated the effects of ethicalclimates on workplace bullying, and a few otherstudies have investigated other dysfunctional anddeviant behaviors (e.g., Peterson, 2002; Vardi,2001). A recent study by Arnaud and Schminke(in press) found that ethical climates, collectivemoral emotion, and collective ethical efficacy in-teract and influence ethical behavior. In particu-lar, they found that ethical climates promote eth-ical behavior when collective empathy andcollective ethical efficacy levels are high. But onthe whole, this is an area that is relatively unex-plored, and there is need for more longitudinalexploration (Smith et al., 2009) in this area. Forinstance, some lines of inquiry could study theeffects of ethical climates on sexual harassmentand corporate fraud, among other variables.

Conclusions

This article has reviewed the existent literatureon ECT and offered a thorough literature re-view on both the antecedents and the effects of

ethical climates. Ethical climates have been dem-onstrated to have a variety of effects, some posi-tive and some negative, on organizational out-comes. This fact, when coupled with frequentlyoccurring organizational ethical transgressions,emphasizes the importance of studying ethicalclimates.

However, there remain several areas in ECTresearch in need of improvement and others that

offer opportunities for future study. One issue inthe research base on ethical climate is the use ofdifferent measures. This situation makes it moredifficult to compare results across the breadth ofstudies. Another issue is that most studies haverelied on traditional organizational outcomes,which perhaps has contributed toward markingegoistic climates as negative. Most of the existentresearch base suggests that benevolent and prin-cipled climates are preferred over egoistic climatesin an organizational context. However, there maybe cases where instrumental climates are prefera-ble to benevolent or principled climates. We urgefuture research to take a fresh approach to thisissue and investigate positive effects of instrumen-tal climates as well as negative effects of benevo-lent or principled climates.

Finally, we have listed a few areas for furtherexploration that we believe will enhance theknowledge base on ECT. We especially advocatethat managers and practitioners be provided witha detailed and unambiguous schema to be able toestablish and manage ethical climates. The morerobust the base of ECT can be made, the better itis for organizational research—and therefore, fororganizations and practicing managers. If moreresearch is conducted, we can hope to be betterable to control and curtail deviant and dysfunc-tional behavior.

Acknowledgments

We wish to thank Timothy Devinney and two anonymousreferees for their helpful suggestions.

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