ethical decision making and health care managers...

Ethical decision making and health care managers

Ethical decision making and health care managers: Developing managerial profiles based on ethical frameworks and other influencing factors

A thesis submitted to the

Office of Research and Commercialisation

Queensland University of Technology

For the degree of Doctor of Philosophy (PhD)

2010

By Gian Luca Casali BAA, MBA

Ethical decision making and health care managers | ii

Keywords

Business ethics, ethical decision making, ethical profiles, health care managers,

moral philosophy, organisational culture, profiling, public sector, scale development.

Notes on Structure and Format of the Thesis

This thesis is for a PhD by publication. Chapters 2 to 7 consist of published papers,

where such papers have been published in a peer-reviewed journal or conference

approved by the Faculty Research Committee during the period of candidature, and

where the quality of such papers is appropriate to PhD-level.

This thesis meets the requirements outlined in QUT’s Manual of Policies and

Procedures, Appendix 9/14: Presentation of PhD Theses by Published Papers.

Where papers have multiple authorships, the candidate must be the principal author

of at least one of three papers (minimum number of papers is normally three) and

have written permission of the co-authors. The remaining sections (abstract,

introduction, background of the research, and conclusion) link and summarise the

research papers to provide a coherent narrative to the overall structure of the thesis.

Ethical decision making and health care managers | iii

Abstract

Whether the community is looking for “scapegoats” to blame, or seeking more

radical and deeper causes, health care managers are in the firing line whenever there

are woes in the health care sector. The public has a right to question whether ethics

have much influence on the everyday decision making of health care managers. This

thesis explores, through a series of published papers, the influence of ethics and other

factors on the decision making of health care managers in Australia. Critical review

of over 40 years of research on ethical decision making has revealed a large number

of influencing factors, but there is a demonstrable lack of a multidimensional

approach that measures the combined influences of these factors on managers. This

thesis has developed an instrument, the Managerial Ethical Profile (MEP) scale,

based on a multidimensional model combining a large number of influencing factors.

The MEP scale measures the range of influences on individual managers, and

describes the major tendencies by developing a number of empirical profiles derived

from a hierarchical cluster analysis. The instrument was developed and refined

through a process of pilot studies on academics and students (n=41) and small-

business managers (n=41), and then was administered to the larger sample of health

care managers (n=441). Results from this study indicate that Australian health care

managers draw on a range of ethical frameworks in their everyday decision making,

forming the basis of five MEPs (Knights, Guardian Angels, Duty Followers,

Defenders, and Chameleons). Results from the study also indicate that the range of

individual, organisational, and external factors that influence decision making can be

grouped into three major clusters or functions. Cross referencing these functions and

Ethical decision making and health care managers | iv

other demographic data to the MEPs provides analytical insight into the

characteristics of the MEPs. These five profiles summarise existing strengths and

weaknesses in managerial ethical decision making. Therefore identifying these

profiles not only can contribute to increasing organisational knowledge and self-

awareness, but also has clear implications for the design and implementation of

ethics education and training in large scale organisations in the health care industry.

Ethical decision making and health care managers | v

Contents

Keywords ii

Notes on Structure and Format of the Thesis ii

Abstract iii

Contents v

List of Tables ix

List of Graphs ix

List of Figures x

Abbreviations xi

Statement of original authorship xiii

Part 1 Thesis background, research context, and theoretical framework development 1

Chapter 1 Introduction 2

1.1 Background of the study 2

1.2 Aims and objectives 6 1.2.1 Objective 1 6 1.2.2 Objective 2 7 1.2.3 Objective 3 7 1.2.4 Objectives 4 and 5 7

1.3 Thesis outline: Linking the research papers to the research aim and objectives 8

1.4 Summary of the six research papers 13 1.4.1 Chapter 2 (Objective 1) 14 1.4.2 Chapter 3 (Objective 2) 14 1.4.3 Chapter 4 (Objective 3) 15 1.4.4 Chapter 5 (Objective 4) 15 1.4.5 Chapter 6 (Objective 3) 16 1.4.6 Chapter 7 (Objectives 4 and 5) 17 1.4.7 Chapter 8 Conclusion 17

Statement of contribution of co-authors for thesis by published papers 19

Chapter 2 Treating an unhealthy organisational culture: The implications for managerial ethical decision making of the Bundaberg Hospital Inquiry 20

2.1 Abstract 20

2.2 Introduction 20 2.2.1 Example 1: Poor decision-making processes and the employment of an

inappropriate staff member 23 2.2.2 Example 2: Poor decision-making processes and a culture of “cover up and

protection” 25

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2.2.3 Example 3: Poor decision-making processes and workplace harassment and bullying 26

2.3 Organisational culture and its link to ethical decision-making processes 28

2.4 Aligning personal and organisational values: The Value Congruence Model 32

2.5 Moving beyond a value congruence model 36

2.6 Conclusion 37

Chapter 3 An evidence-based taxonomy of factors influencing ethical decision making: A critical response to the current literature 38

3.1 Abstract 38

3.2 Introduction 38 3.2.1 An overview of the literature on factors influencing ethical decision making 40

3.3 Classifying factors influencing ethical decision making 44 3.3.1 The degree of a factor’s influence on ethical decision making:

Ethical factors 45 3.3.2 The degree of a factor’s influence on ethical decision making:

Personal factors 47 3.3.3 The degree of a factor’s influence on ethical decision making:

Organisational Factors 54 3.3.4 The degree of a factor’s influence on ethical decision making:

External Factors 59

3.4 Summary of the literature review 60

3.5 A taxonomy of factors influencing ethical decision making 61 3.5.1 First dimension the ethical factors 63 3.5.2 Second dimension: the individual factors 65 3.5.3 Third dimension: the organisational factors 66 3.5.4 Fourth dimension: the external factors 67

3.6 Conclusion 68

Part 2 Pilot study 69

Introduction 69

The MEP sub-scales 71

Preamble 71

Chapter 4 A quest for ethical decision making: Searching for the holy grail and finding the sacred trinity in ethical decision making by managers 74

4.1 Abstract 74

4.2 Introduction 74

4.3 The study 78

4.4 Hypotheses 79 4.4.1 Hypothesis one (H1) 80 4.4.2 Hypothesis two (H2) 81

4.5 Measure 81

4.6 Sample 84

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4.7 Results empirical analysis 84

4.8 Conclusion 90

Chapter 5 Creating managerial ethical profiles: An exploratory cluster analysis 92

5.1 Abstract 92

5.2 Introduction 92

5.3 Literature review 96

5.4 Method 99

5.5 Measure 99

5.6 Sample characteristics 101

5.7 Data analysis 101

5.8 Results 104

5.9 Discussion 105

5.10 Developing the Managerial Ethical Profiles 106 5.10.1 Profile 1: Duty Follower 107 5.10.2 Profile 2: The Chameleon 108 5.10.3 Profile 3: Guardian Angel 110 5.10.4 Profile 4: The Defender 111 5.10.5 Profile 5: The Knight 112

5.11 Conclusion 114

5.12 Possible practical application for the MEP scale 115

5.13 Future research and limitations 116

5.14 Footnote 117

PART 3: The main study results and conclusion 118

Chapter 6 Developing a multidimensional scale for ethical decision making 119

6.1 Abstract 119

6.2 Introduction 119

6.3 Literature review of tools for measuring ethical decision making 121

6.4 Theoretical assumptions for the MEP scale 127

6.5 Method 131

6.6 Research sample 134

6.7 Results 134

6.8 General discussion 138

6.9 Conclusion 141

Chapter 7 The relationship between managerial ethical profiles and individual, organisational, and external factors influencing the ethical decision making of health care managers in Australia 144

7.1 Abstract 144


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7.3 Methodology 147

7.4 Instrument 147

7.5 Sample characteristics 149

7.6 Procedure 149

7.7 Analysis 150

7.8 Results 151 7.8.1 Two-step cluster analysis results 151 7.8.2 Discriminant analysis results 153

7.9 Discussion 154 7.9.1 Managerial ethical profiles 154 7.9.2 Managerial ethical orientations 160

7.10 Conclusion 161

Chapter 8 Conclusion 164


8.2 Key findings 164

8.3 Significance and practical application 171 8.3.1 Contribution to the current knowledge of factors influencing ethical

decision making. 171 8.3.2 Contribution to the current knowledge of tools that measure ethical

decision making in organisations 172 8.3.3 Contribution to the current knowledge of profiling in business 172

8.4 Limitations of the study and directions for future research 175 8.4.1 Continuing development and refinement of the MEP scale 175 8.4.2 Exploring the extent to which the MEPs can be applied 176 8.4.3 Examining the relationship between an organisation’s ethical position

and that of the outside community 177

References 179

Appendices 202

Appendix 1 MEP Questionnaire 202

Ethical decision making and health care managers | ix

List of Tables

Table 1.1 Summary of the pilot and main study 13 Table 3.1 List of academic journals reviewed 41 Table 3.2 A comparison of factors in reviews of the literature on ethical decision making

1962-2010 43 Table 3.3 Results of Cronbach Alpha analysis 72 Table 4.1 Mean differences between small-business managers, and academics and student in

relation to the eight ethical sub-scales 85 Table 4.2 Estimated marginal means for ethical decision making 88 Table 5.1 Comparison of HCA results (computed means) from Study 1 and Study 2 in

relation to the eight ethical sub-scales 105 Table 6.1 Summary of five tools for measuring ethical decision making 123 Table 6.2 MEP scale item loadings: Model A (eight-factor model) 133 Table 6.3 Results of Confirmatory Factor Analysis 135 Table 6.4 Correlation, average variance extracted (AVE), and shared variance estimates for

Model A 138 Table 7.1 Standardised means of the five MEPs: results of the two-step cluster, ANOVA,

and Scheffe 153 Table 7.2 Discriminant analysis 154 Table 8.1 MEPs and related scores on ethical sub-scales of health care managers in

Australia. 165 Table 8.2 Correlation between the five managerial ethical profiles and the three orientations

168

List of Graphs

Graph 4.1 Estimated marginal means 86

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List of Figures

Figure 1.1 Thesis framework: aim, objectives, and thesis parts and papers. 9 Figure 1.2 Part 2: The pilot study—aims and methods 10 Figure 1.3 The Study—aims and methods 12 Figure 3.1 Taxonomy of factors influencing managerial ethical decision making 62 Figure 5.1 The four temperaments: phlegmaticus, cholericus, sanguineus, melancholicus 93 Figure 5.2 Dendogram for HCA on academics and students 104 Figure 5.3 Dendogram for HCA on small-business managers 104 Figure 5.4 Duty Follower profile according to the eight sub-scales from the MEP scale 107 Figure 5.5 Chameleon profile according to the eight sub-scales of the MEP scale 108 Figure 5.6 Guardian Angel profile according to the eight sub-scales from the MEP scale 110 Figure 5.7 Defender profile according to the eight sub-scales from the MEP scale 111 Figure 5.8 Knight profile according to the eight sub-scales from the MEP scale 112 Figure 7.1 The Knight profile 155 Figure 7.2 The Guardian Angel profile 156 Figure 7.3 The Duty Follower profile 157 Figure 7.4 The Defender profile 158 Figure 7.5 The Chameleon profile 159 Figure 8.1 Knight orientation 168 Figure 8.2 Guardian Angel orientation 168 Figure 8.3 Duty Follower orientation 169 Figure 8.4 Defender orientation 169 Figure 8.5 The Chameleon profile 170

Ethical decision making and health care managers | xi

Abbreviations

AGFI Adjusted Goodness of Fit

ANOVA Analysis of Variance

ANZAM Australia and New Zealand Academy of Management

AVE Average Variance Extracted

AWB Australian Wheat Board

CFA Confirmatory Factor Analysis

CFI Confirmatory Fit Index

CMD Cognitive Moral Development

CR Composite Responsibility

DIT Defining Issue Test

EDM Ethical Decision Making

EPQ Ethics Position Questionnaire

HCA Hierarchical Cluster Analysis

MANOVA Multivariate Analysis

MBTI Myers-Briggs Type Indicator

MEP Managerial Ethical Profile

MES Multidimensional Ethics Scale

MJT Managerial Judgment Test

MVP Managerial Value Profile

QH Queensland Health

RMSEA Root Mean Square Error of Approximation

Small-business manager: The term represents a sample of small-business owners,

small-business managers, or both.

SRMR Standardised Root-Mean-Square Residual

TEQ Team Effectiveness Questionnaire

Ethical decision making and health care managers | xii

Publications

Casali, G. L., & Day, G.E. (2010). Treating an unhealthy organisational culture: the

implications of the Bundaberg Hospital Inquiry for managerial ethical

decision making. Australian Health Review, 34(1) 73–79.

Casali, G. L. (2009). Developing a multidimensional scale for ethical decision

making: The Managerial Ethical Profile (MEP). Paper presented at the 23rd

Annual Australia and New Zealand Academy of Management Conference

(ANZAM 2009), Southbank, Melbourne.

Casali, G. L. (2008a). An evidence-based taxonomy of factors influencing ethical

decision making: A critical response to the current literature. Proceedings of

the Eben Research Conference, Lille, France.

Casali, G. L. (2008b). Creating managerial ethical profiles: An exploratory cluster

analysis. Electronic Journal of Business Ethics and Organisation Studies,

13(2). pp. 27-34.

Casali, G. L. (2008c). The relationship between managerial ethical profiles (MEP)

and individual, organisational and external factors influencing the ethical

decision-making of healthcare managers in Australia. Paper presented at the

22nd ANZAM Conference (ANZAM 2008), Auckland, New Zealand.

Casali, G. L. (2007). A quest for ethical decision making: Searching for the Holy

Grail and finding the sacred trinity in ethical decision making by managers.

Social Responsibility Journal, 3(3), 50-59.

Ethical decision making and health care managers | xiii

Statement of original authorship

This thesis is submitted to the Queensland University of Technology in fulfilment of

the requirements for the degree of Doctor of Philosophy by publication.

This thesis represents my own work and contains no material that has been

previously submitted for a degree or diploma at this University or any other

institution, except where acknowledgement is made.

Signature ............................................

Gian Luca Casali

Date ............................................................

Ethical decision making and health care managers | xiv

Acknowledgements

Firstly I would like to thank Dr Trevor Jordan, my principal supervisor, for his

invaluable contribution, knowledge, and direction that he has provided me with, and

for his dedication and complete availability during these years.

I would also like to thank my Associate Supervisor, Professor Clive Bean, for his

technical support and for his thorough review of the final draft for this thesis and of

some of the papers included in this thesis.

I would also like to thank my Mum, Elisabetta; my Father, Mario; and my partner,

Natalia, for their constant support and tender loving care throughout these

challenging years.

Ethical decision making and health care managers | 1

Part 1 Thesis background, research

context, and theoretical framework

development

Background to research and literature review

Chapter 1 introduces the thesis, establishing the research question, and showing the

links between the research papers that form the chapters of the thesis.

Chapter 2, the first paper out of the six included in this thesis, establishes the

context that has prompted this research enquiry. Using Liedtka’s Value Congruence

Theory (1989), Chapter 2 discusses the implications for managerial ethical decision

making arising from the Bundaberg Hospital Inquiry.

Despite a strong code of conduct within Queensland Health, the Public Sector Ethics

Act 1994 (Queensland Government, 2010), and strong individual staff with good

values, the lack of fit between espoused organisational values and values in everyday

practice created an opportunity for rogue individuals to exploit the organisation for

personal gain. Given that the ethical decision-making capacity of health care

managers remains at the front line in the battle against unethical and unprofessional

practice, reflection on the Bundaberg Hospital Inquiry prompts the question: What

are the factors influencing managerial ethical decision making for health care

managers in Australia?


Chapter 3 aims to answer the question prompted by Chapter 2 by reviewing 40

years of literature on decision making, searching for these influencing factors.

Subsequently, it provides a multidimensional model for managerial ethical decision

making.

Chapter 1 Introduction

This introductory chapter outlines the background of the study and identifies the

current gap in the literature that was investigated. The main research aim and five

related objectives are then discussed. The introduction also provides evidence of the

scholarly and practical significance of the study. It is argued that this research is of

academic significance both in terms of its subject matter and methodology. It is also

posited that it is of significance beyond academia, particularly—but not limited—to

small, medium, and large health care organisations interested in improving the

ethical decision-making capabilities of their managers at all levels. Following the

discussion on the background and significance of the study, this chapter outlines the

thesis and the link between the six research papers, the research aim, and the five

objectives. Finally, as this doctorate is by publication, this chapter provides a

summary of the six papers included in this thesis.

1.1 Background of the study

Health care is a complex industry sector where patient safety is paramount, but

where other drivers—such as the ability to authenticate pharmaceuticals and medical

devices, track and trace products from manufacture to the patient, and improve the

supply chain—rank a close second. Ethical behaviours, decision making, and

leadership are becoming increasingly important in the health care industry due to the


switch of strategy focus from being traditionally “service oriented” to being more

“profit oriented” (Rolland, 2009, p. 51). Due to this recent switch, and with the

increasing pressure to satisfy the business model, the health care industry has been

undergoing a process of restructuring that has not been immune to unethical practices

and public attention (Rolland, 2009). Another element to add to the risk of unethical

behaviours in this industry is the fact that it has been service based for hundreds of

years, and therefore it is rich in precedents and references for law, medicine, and

ethics in clinical medicine, but poor in references for ethics in health care

management processes (Wingfield, Bissell, & Anderson, 2003).

The health care industry in Australia is a major part of the national economy with

total public and private expenditure on health care equalling approximately 10% of

gross domestic product and with more than $65 billion spent on health care each

year. More than 1,200 public- and private-sector hospitals in Australia employ over

half a million employees (AIHW, 2010). This industry is vital not only because of its

economic importance, but also due to its intrinsic significance directly related to

people’s well-being; therefore, it is at the centre of public scrutiny. The most

prominent issue facing managers in the health care industry is inadequate public

findings to match the growing costs of providing long-term care and occupancy

levels (Madas, 2000). This is the result of various political and regulatory,

economical, and social factors. It has been argued that not only are doctors

challenged by tricky ethical situations, but also that health care managers are

constantly facing ethical dilemmas (Galloro, 2000). Health care managers have to

deal with increasing tension between good business practice and the practice of good

medicine: a situation that, if mismanaged, could end in tragedy (Galloro, 2000).


Therefore, due to an increasing number of health care managers dealing with ethical

problems, and the importance of this industry, this thesis will investigate the factors

that influence ethical decision making.

Liedtka (1989) argued that the reality of the process through which individuals make

ethical decisions in organisations, and the importance of factors that influence the

decision-making process, remain largely a black box although ‘academics debate

theories, and consultants offer “how-to” solutions’ (p. 805). Therefore, this thesis

uses the current literature on factors influencing ethical decision making and

profiling techniques to provide a key to unlocking the black box of managerial

ethical decision making in the health care industry.

Profiling techniques are known widely for being applied to the area of criminal

justice, not only for their usefulness to that field, but also due to being heavily

publicised by television shows such as Cracker, Bones, CSI, Castle, and The

Mentalist. Criminal profiles are developed by using different factors such as gender,

ethnicity, race, age, personal history, abusive childhood, and peer pressure in order to

identify the characteristics of the perpetrators of specific crimes (Pollock, 2004).

Potential suspects are then identified on the basis of these profiles. However,

criminal justice profiling results in justifiable criticisms: questions of individuals’

rights, issues of profiles biased through prejudice and stereotyping, and the lack of

theoretical and empirical support for its reliability and usefulness in practice

(Pollock, 2004). These misuses of profiling in the criminal justice domain remind us

that the possible predictive capacity of profiling is always a matter of probability

rather than certainty. Profiling aims to discriminate between, not against, people.


Nevertheless, profiling is a valid and useful tool that has been applied in many

different areas for hundreds of years. Since the beginning of behavioural science,

researchers and practitioners have sought to classify people according to their

particular personality traits, with the aim of being able to predict their future

behaviour. Profiling is a classifying technique that groups individuals’ observed

physical, social, or psychological differences into a series of types, the behaviour of

which will be more or less predictable. One of the first recorded attempts at profiling

was by the Greek doctor Hippocrates (c.460–370 BCE), who developed four profiles

based on four factors, which he called “humours” (fluids).

Profiling is also being extensively applied in business on a number of different

occasions and for various purposes. For example, profiling techniques have been

used to profile consumers based on different characteristics such as their decision-

making styles (Sproles & Kendall, 2005), their need to retrieve information (Fan,

Gordon, & Pathak, 2006), and their motivation when purchasing via online auctions

(Hou & Elliott, 2010). Donald Trump (2004) provided another application of

profiling in business: understanding the psychology of people with whom he

negotiates has contributed to his success as a dealmaker. Another example of the

importance of psychological profiling in business is the notion that the potential

degree of success in a particular role can be linked to the possession of particular

personality traits such as being an extrovert, an introvert, intuitive, emotive, rational,

and judgmental. Thus, Briggs-Myers, McCaulley, Quenk, and Hammer, (1998)

developed a tool to psychologically profile people by a number of personality traits

called Myers-Briggs Personality Types. Another widely used profiling tool is the


Defining Issues Test (DIT) developed by Rest (1979, 1990), which is based on

Kohlberg’s Cognitive Moral Development theory (Kohlberg, 1969).

In summary, from the ancient Greeks to present day, the need to understand human

behaviour and render it more predictable and manageable has caused profiling

techniques to be applied to a broad range from business to medicine, and from justice

to online actions. Observing the number of scandals that have occurred over the past

10 years in the business sector, it is not surprising that there should be some renewed

interest in being able to understand and reduce the risk of individuals’ engagement in

unethical behaviours. As profiling techniques have already being applied

successfully in different areas for centuries, applying them, with ethical

considerations, to what managers are dealing with every day, is overdue.

1.2 Aims and objectives

The overall aim of this thesis is to apply profiling techniques to factors influencing

ethical decision making in order to profile health care managers in Australia. This

thesis seeks to achieve this overall aim with the following objectives:

1.2.1 Objective 1

Establish how important managerial ethical decision making is to health care

administration by examining a recent prominent example of alleged unethical

behaviour at the Bundaberg Hospital in Queensland.

(Chapter 2)


1.2.2 Objective 2

Develop an evidence-based taxonomy of factors influencing ethical decision making

based on the review of more than 40 years of literature on the topic.

(Chapter 3)

1.2.3 Objective 3

Develop a self-administered questionnaire based on the proposed evidence-based

taxonomy (Objective 2) and, by using confirmatory factor analysis, test its ability to

discriminate the ethical, personal, organisational, and external factors that influence

individual managers. Then, administer the questionnaire to a representative sample

of Australian health care managers.

(Chapter 4 and Chapter 6)

1.2.4 Objectives 4 and 5

Use profiling techniques to factors influencing ethical decision making of health care

managers in Australia, two main applications:

1.2.4.1 Objective 4

Use cluster analysis to develop managerial ethical profiles (MEPs) based on the

responses to eight ethical sub-scales of the questionnaire.

(Chapter 5 and Chapter 7)

1.2.4.2 Objective 5

Use discriminant analysis to extend the MEPs and determine how managers are

oriented to a range of individual, organisational, and external factors.

(Chapter 7)


1.3 Thesis outline: Linking the research papers to the research aim and objectives

In order to achieve the main aim and the five objectives of this thesis (Section 1.2), a

series of six papers have been included as chapters in this thesis (Figure 1.1). This

section explains the link between the papers and the objectives, how the papers

achieve the aim of the thesis, and their position in the structure of this thesis (Figure

1.1)

This thesis by published work consists of eight chapters, six of which are stand-alone

papers (Chapters 2–7) that have been published or accepted for publication; an

introduction (Chapter 1) and a conclusion (Chapter 8). The main aim of this thesis is

to profile Australian health care managers based on the factors that influence their

decision making as a whole. Each paper in this study plays an important role in

achieving one or more of the five objectives that have been identified as fundamental

to the main aim (Figure 1.1). Figure 1.1 clearly shows that each of the five objectives

build on each other (the white arrow represents the connection between the five

objectives) starting from Objective 1 and finishing with Objective 5. This thesis is

structured in three main parts: Part 1 (green circle) introduces the thesis, Part 2 (blue

circle) presents the results of the pilot study carried out to initially support the claim

of this thesis, and Part 3 (orange circle) reports on the results of the main study and

concludes that the main aim has been archived.


Figure 1.1 Thesis framework: aim, objectives, and thesis parts and papers.

Part 1 comprises three chapters, the first of which provides background to the

research, and a literature review on factors influencing managerial ethical decision

making. The second and third chapters are represented by two of the six papers

included in this thesis: the first establishes the importance of better understanding

managerial ethical decision making of health care managers by examining a recent

prominent example of alleged unethical behaviour at the Bundaberg Hospital in


Queensland (Chapter 2); the second reports on the development of an evidence-based

taxonomy of factors that influence ethical decision making from the review of the

past 40 years of literature in that area (Chapter 3).

Part 2 reports on the results from the pilot study for the thesis. It presents two papers

(Chapters 4 and 5) and an introductory section that explains the initial development

of the MEP questionnaire used for the pilot study (see Figure 1.2).

Figure 1.2 Part 2: The pilot study—aims and methods

The scope of the introduction of Part 2 is to outline the initial development of the

MEP scale that is otherwise discussed only in Part 3 with the results from the study

(441 health care managers). However, because the data for the pilot study has been

collected by using the ethical sub-scales of the MEP scale, an initial discussion of the

development of the scale is due in Part 2. Subsequent to the introduction to the MEP

scale, Chapter 4 provides an initial validation of the eight ethical sub-scales of the

MEP scale in terms of their capacity to discriminate between different cohorts of

people. In order to test the MEP scale’s psychometric capabilities, two cohorts were

chosen because of their significant differences. The first cohort was represented by


second-year nursing students and academics from the field of religion, philosophy,

ethics, and business ethics; the second cohort by small-business managers. The initial

results from this test reported significant differences between the two cohorts in

relation to the eight ethical sub-scales of the MEP scale, which provided the initial

step into proving its psychometrical capabilities.

Chapter 5 describes the results obtained from using profiling techniques based on

ethical factors (the MEP scale’s eight ethical sub-scales) to create MEPs (clusters).

Hierarchical cluster analysis (HCA) was performed on the data from the two cohorts

(academics and students, and small-business managers) in order to initially discover

possible patterns related to the eight ethical sub-scales of the MEP scale. In this

study, in order to be an acceptable cluster, it has to satisfy two criteria: internal

homogeneity and external heterogeneity, which means that internally the variation

between managers’ perceptions about the eight ethical sub-scales inside a cluster

must be minor, but, at the same time, these differences must be greater between

clusters. Results of the HCA performed on academics and students found five

clusters that fulfilled both requirements for being an MEP (cluster) for this study.

However, only four clusters were found for the small-business managers that

satisfied the two criteria for inclusion. An interesting fact that emerged from this

initial analysis was that the four clusters found in the second cohort were the same as

the four found in the first cohort and one was totally missing.

Part 3 builds upon the results of the pilot study (Part 2), as shown in Figure 1.3, by

further developing the new scale and further advancing the MEPs. This part of the

thesis comprised two papers that report the results from the main study—441 health


care managers in Australia—which is the main focus of this thesis. The first paper

(Chapter 6) further develops the MEP scale based on the multidimensional

framework proposed in Chapter 3, and the preliminary investigation based on the

initial scale development discussed in the introductory section of Part 2, the pilot

study).

Figure 1.3 The Study—aims and methods

This chapter not only discusses the scale development process for the MEP scale

(Objective 3), but also provides evidence that the schools of moral philosophy are

multidimensional in nature (Objective 3). Chapter 7 confirms that the data from a

sample of 441 Australian health care managers can be summarised by five MEPs.

In summary, Part 2 contains two papers that report the results from the pilot study

comprising two samples of 41 respondents each (academics and students n=41, and

small-business managers n=41) . On the other hand, each paper included in Part 3


reports the result of the main study, which is based on a cohort of 441 health care

managers in Australia. The pilot study of this thesis functioned to develop the MEP

scale and apply profiling techniques to factors that influence ethical decision making

(Table 1.1). In contrast, Part 3 further developed the MEP scale and the MEPs by

applying profiling techniques to factors influencing ethical decision making of a

number of Australian health care managers (see Table 1.1).

Table 1.1 Summary of the pilot and main study

PART 2 Pilot Study (n=41 x2)

PART 3 The Main Study (n=441)

MEP scale development

Chapter 4 tests the discriminant capabilities of the eight ethical sub-scales of the MEP scale, reporting significant different between two cohorts (41 academic and students, and 41 small-business managers).

Chapter 6 reports on the MEP scale development, and especially on the justification and support about the psychometrics capabilities of the eight ethical sub-scales by using the data collected from the main study on health care managers in Australia (n=441) .

Profiling creation

Chapter 5 explores the application of profiling techniques by using HCA on the results from two small cohorts 41 academic and students, and 41 small-business managers, based on the degree of influence that the eight ethical sub-scales of the MEP scale.

Chapter 7 reports on using a two-step profiling technique to the date collected from the main study about health care managers in Australia (n=441). Step one is to use two-steps cluster analysis on the results of the eight ethical sub-scales in order to identify significant different clusters (profiles), and then using discriminant analysis on the other influencing factors and the cluster membership previously identified.

1.4 Summary of the six research papers

This section provides a summary of the six papers included in this thesis,

concentrating in particular on the aspects that are related to the main aim and the

objectives of this thesis (Section 1.2).


1.4.1 Chapter 2 (Objective 1)

Casali, G. L., & Day, G.E. (2010). Treating an unhealthy organisational culture: The

implications of the Bundaberg Hospital Inquiry for managerial ethical

decision making. Australian Health Review, 34(1) 73–79.

This paper establishes the context that has prompted this research enquiry. Using

Leidtka’s Value Congruence Theory, the paper discusses the implications for

managerial decision making as a result of the Bundaberg Hospital Inquiry. Despite

the fact that there is a well definied code of conduct within Queensland Health and

the Public Sector Ethics Act 1994, and strong individual staff with good values, the

lack of fit between espoused organisational values and values in everyday practice

created an opportunity for rogue individuals to exploit the organisation for personal

gain. Given that the ethical decision-making capacity of health care managers

remains at the frontline in the battle against unethical and unprofessional practice,

reflecting on the Bundaberg Hospital Inquiry prompts the question: what are the

factors influencing managerial ethical decision making for health care managers in

Australia?


Casali, L. G. (2008a). An evidence-based taxonomy of factors influencing ethical



This paper provides a critical analysis of more than 40 years of research on factors

influencing ethical decision making. As a general result of this analysis, there is a

large number of influencing factors that have been studied mostly independently,


which provides a strong foundation for further research on factors influencing ethical

decision making. Based on the survey of past research, this paper presents an

evidence-based taxonomy of factors influencing decision making as a guide to future

research. Four main categories have been developed based on the nature of the

influencing factors: ethical, individual, organisational, and external.


Casali, G. L. (2007). A quest for ethical decision making: Searching for the Holy

Grail and finding the sacred trinity in ethical decision making by managers.


Chapter 4 uses the MEP scale’s eight ethical sub-scales to identify the degree of

influence that different ethical frameworks play on different people’s decision

making, and whether they differ depending on the industry under consideration. The

MEP questionnaire was distributed to a group of small-business managers (n=41),

and to university academics and students (n=41). The results indicate that there are

statistically significant differences in the ethical decision-making profiles of business

and non-business decision makers: an outcome that suggests that the eight ethical

sub-scales are able to discriminate between people.



analysis. Electronic Journal of Business Ethics and Organization Studies,

13(2). pp. 27-34.


This paper extends the analysis of the questionnaire data in the pilot study to an

investigation of MEPs by using the two different cohorts. After a brief discussion of

the importance of profiling as a predictor of human behaviour, statistical hierarchical

clustering techniques are used to provide a preliminary description of five MEPs:

Knights, Guardian Angels, Duty Followers, Chameleons, and Defenders. However,

only four of the five clusters were common to both cohorts, as the Duty Follower

was missing in the small-business manager. The study concluded that a cluster

analysis was a useful method for finding the natural grouping of poorly understood

influences of ethical principles in decision making and their representativeness in

common practice.






This paper develops an instrument, based on the multidimensional model developed

in Chapter 3, to measure the multiple influences on managerial decision making, and

reports on the validity and reliability of the survey instrument used to gather primary

data. The paper provides evidence of construct content validity and scale validity by

using a number of strategies including semi-structured interviews with experts, a

pilot study, and a larger study. Specifically, this paper demonstrates that variations in

ethical style can be better revealed by creating eight sub-scales to the four major

schools of moral philosophy: ethical egoism, utilitarianism, virtue ethics, and

deontology. The preliminary research confirms that ethical frameworks of individual


managers tend not to mirror the major schools or moral philosophy; rather, individual

managers combine the ethical schools each in their own way.

1.4.6 Chapter 7 (Objectives 4 and 5)

Casali, G. L. (2008c). The relationship between managerial ethical profiles (MEP)

and individual, organisational and external factors influencing the ethical

decision-making of healthcare managers in Australia. Paper presented at the

22nd ANZAM Conference (ANZAM 2008), Auckland, New Zealand.

At the outset, this final paper aims to replicate the results from Chapter 5 in terms of

finding the five MEPs in the Australian health care sector. It then aims to further the

knowledge about MEPs derived in Chapter 6 by testing the correlations between the

MEPs and the individual, organisational, and external influencing factors identified

in Chapter 3. This paper has confirmed the five MEPs from Chapter 6 across the

larger sample (n=441) of health care managers. In addition, it has advanced the

understanding of those five MEPs by fully analysing all of the influencing factors

suggested by the model in Chapter 3. As a result of this analysis, four functions (out

of the 32 items representing the other influencing factors) were identified using

discriminant analysis. However, only three of these four functions were significant in

terms of discriminating between the five MEPs.

1.4.7 Chapter 8 Conclusion

Although each paper establishes its own research question and conclusion, this

chapter concludes the thesis by summarising the overall findings, restating the

significance of the research project, and offering suggestions for further research.

Results from this study indicate that Australian health care managers draw on a range


of ethical frameworks in their everyday decision making, forming the basis of five

MEPs. Results from the study also indicate that the range of individual,

organisational, and external factors that influence decision making can be grouped

into three major clusters or functions. Cross referencing these functions to the MEPs

provides analytical insight into the characteristics of the MEPs. Identifying these

profiles can contribute to increasing organisational knowledge and self-awareness

and inform the design and implementation of ethics education and training in large-

scale organisations especially in the health care industry.


Statement of contribution of coauthors for thesis

by published papers

The authors listed below have certified that:

1. They meet the criteria for authorship in that they have participated in the

conception, execution, or interpretation, of at least that part of the publication in

their field of expertise.

2. They take public responsibility for their part of the publication, except for the

responsible author who accepts overall responsibility for the publication.

In the case of Chapter 2:

Casali, G. L., & Day, G.E. (2010). Treating an unhealthy organisational culture: the

implications of the Bundaberg Hospital Inquiry for managerial ethical decision

making. Australian Health Review, 34(1) 73–79.

Contributor Statement of contribution*

Gian Luca Casali

wrote the manuscript, literature review, and conclusion Signed:

Date

Gary E Day Provided expert insight into the paper, and edited the first version of the paper.

Principal Supervisor Confirmation

I have sighted e-mail or other correspondence from all Co-authors confirming their

certifying authorship.

Name Signature Date


Chapter 2

Treating an unhealthy organisational culture:

The implications for managerial ethical

decision making of the Bundaberg Hospital

Inquiry

2.1 Abstract

This paper explores the interplay between individual values, espoused organisational

values, and the values of the organisational culture in practice in light of a recent

Royal Commission in Queensland, Australia, which highlighted systematic failures

in patient care. The lack of congruence between values at these various levels

impacts on the ethical decision making of health care managers. The presence of

strong individual staff values and institutional ethics regimes, such as the Public

Sector Ethics Act 1994 (QH, 2010) and the Queensland Health Code of Conduct

(QH, 2006), are not sufficient to counteract the negative influence of informal codes

of practice that undermine espoused organisational values and community standards.

The ability of health care managers to make ethical decisions remains at the front

line in the battle against unethical and unprofessional practice.

2.2 Introduction

Early in 2005, a Commission of Inquiry into the operation of the Bundaberg Hospital

in Queensland, and, in particular, the conduct of one surgeon, found serious breaches

of clinical and professional practice. The range of issues identified, and the


subsequent recommendations by the Bundaberg Hospital Commission of Inquiry,

were not new for the health care sector (Davies, 2005). Many other jurisdictions have

had similar inquiries with similar outcomes and recommendations:

New South Wales: Campbelltown-Camden

Victoria: Royal Melbourne Hospital

Western Australia: Australia King Edward Memorial Hospital

The United Kingdom: Bristol Royal Infirmary

South Africa: TownHill Hospital

Canada: Winnipeg Health Sciences Center

Slovenia: Celje Hospital

Scotland: Glasgow’s Victoria Infirmary

New Zealand: Southland DHB and the Princess Mary’s Hospital

(Braithwaite, Travaglia, & Ledema, 2006).

Each inquiry concluded that the quality of care was below reasonable standards and

that the substandard care concerns were often raised by a few dedicated and altruistic

staff members. Communication was problematic between the hospital and the formal

controlling agency responsible for assuring the protection of patients, as well as

between the health care organisation, patients, and their relatives. There was a

breakdown in formal organisational procedures for reporting adverse medical events,

and there was a poor sense of teamwork and collaboration.

Despite repeated investigations into these systemic weaknesses, and subsequent

recommendations to prevent such incidents re-occurring, health systems continue to

experience critical incidents and catastrophic system failures. This chapter examines

some of the systemic failures, caused by individual and organisational values,


revealed in the Bundaberg Hospital Commission of Inquiry. Some prominent

examples of poor decision making highlighted by the Inquiry can be seen as

symptoms of an underlying pathology often misdiagnosed as simply a lack of

congruence between the values of individual managers and the organisation, with

either a healthy organisation being undermined by bad individuals or good

individuals being subverted by a bad system.

However, analysis of the situation using Liedtka’s Value Congruence Model

(Liedtka, 1989) is more revealing. This model has been used extensively by a

number of researchers who are interested in investigating organisational culture by

specifically looking at the nexus between individual and organisation values

(Edwards & Parry, 1993; Glover, Bumpus, Logan, & Ciesla, 1997; Liedtka, 1989,

1992; McDonald & Gandz, 2006; Posner & Schmidt, 1993). Specifically, the model

explains why, as in the case of the Bundaberg Hospital, the presence of strong

individual values among staff and strong espoused organisational values in line with

community expectations—backed up by legislation and ethics regimes—were not

sufficient to prevent an unhealthy situation from occurring. In particular, the lack of

congruence between the espoused values of the organisation and the values

expressed in everyday organisational practices illustrates how large organisations can

be exploited by rogue individuals.

Establishing congruence between espoused and in-practice values, which are so vital

to organisational health, will require values and ethics to be more intentionally and

systematically incorporated into managers’ everyday ethical decision making. The


following three examples taken from the Inquiry illustrate the contribution of poor

decision making to systemic failure.

2.2.1 Example 1: Poor decision-making processes and the employment of an inappropriate staff member

In late 2005, the Bundaberg Hospital Commission of Inquiry was superseded by the

Queensland Public Hospitals Commission of Inquiry (Davies, 2005), to which one

body of evidence, the initial reason for the investigation, was provided. The evidence

concerned the employment of, and alleged subsequent substandard care provided by,

Dr Jayant Patel (Foster, 2005). Between 1978 and 2005, first in the America (New

York and Oregon) and then in Bundaberg, Australia, Dr Patel was associated with a

number of adverse clinical outcomes, including deaths, mostly due to poor clinical

practice and negligence. In 1984, in Rochester, New York, Patel had been cited for

failing to properly examine patients before surgery (just as he later appeared to be

doing in Queensland between 2003 and early 2005), and as a result his surgical

practice was restricted (Morton, 2005). In addition, he was accused of falsifying

operating theatre reports; abandoning or neglecting patients in immediate need; and

harassing, abusing, or intimidating patients (Sandall, 2005).

Despite the documented shortcomings of his clinical practice, the falsification of his

application to practice medicine in Queensland, a lack of adequate reference checks

from the Medical Registration Board of Queensland, and no performance appraisal

during his appointment, Patel was appointed as the Head of Surgery at the

Bundaberg Hospital in 2003. After less than two years in the position and a long list

of complaints from both staff and patients about substandard surgical care and

treatment, the doctor was allowed to leave the country without answering questions

about anomalies in practice and registration.


The Queensland Public Hospitals Commission of Inquiry (Davies, 2005) heard

evidence that Patel remained in his position primarily for utilitarian reasons as the

hospital stood to lose substantial amounts of money from the Elective Surgery

Waiting List Reduction Program should he leave or be stood aside. Similarly, one

could question the decision-making processes within the Health Service District used

by the hospital to clinically review this surgeon’s competence and complication

rates. The Commission uncovered a litany of poor decision-making processes, from

the failure to properly check medical credentials, the inability to critically review

performance in light of staff and patient complaints, and a system that allowed a

suspect surgeon to continue practising so that the hospital met its surgical targets.

Clearly, these decision-making processes have led to substantial public distrust of the

local health system, poor clinical outcomes, the preventable deaths of a number of

patients, distress for patients and their families, and a huge expense for the

Queensland Government in undertaking a Royal Commission to investigate the

issues. At the heart of the problem was failure by health care managers to exercise

care for others by giving due attention to the harm principle when making decisions.

When employing a new medical staff member, Queensland Health failed to exercise

due diligence and its duty of care to not harm others, that is, patients and staff. This

occurred despite the presence of well-defined espoused organisational values in both

the Queensland Health Code of Conduct (QH, 2006) and the Public Sector Ethics

Act 1994 (Queensland Government, 2010), and strong shared values of individual

staff. If the principle of diligence and non-maleficence—not harming others—had


been applied when employing new staff, a credential check would have been

performed, and performed thoroughly.

2.2.2 Example 2: Poor decision-making processes and a culture of “cover up and protection”

The Bundaberg Hospital Commission of Inquiry clearly illustrates the destructive

effects of an organisational culture that in practice values covering up and protection

over those values—such as honesty, integrity, and duty of care—that are supported

both privately by the individual staff and publicly by the organisation. The

Bundaberg Inquiry itself resulted from the courageous action of one nurse, Toni

Hoffman, who refused to be silenced about the apparent clinical incompetence and

actions of one doctor. The situation highlights a breakdown in a major hospital

procedure relating to reporting an adverse medical event (Davies, 2005). It was only

after unsuccessfully following the organisational procedures to have the hospital

review Dr Patel’s practice and to prevent him from harassing patients, general staff,

and nurses that Hoffman decided to go public. As required by hospital procedures in

the case of a staff member wanting to report an adverse medical event, a ‘sentinel

event report’ (p. 450) must be filed and given to hospital officials—a procedure that

Hoffman followed correctly (Davies, 2005). However, her report was never passed

on. She subsequently decided to collect evidence of the doctor’s poor clinical

outcomes herself, detailing information about 14 cases and then sending the report to

the District Health Manager. Failing to have her concerns adequately dealt with both

at the hospital and district levels, this report was eventually provided to a State

Member of Parliament, who raised the matter on the floor of the House. This action

resulted in the Queensland Premier establishing the Bundaberg Hospital Commission

of Inquiry (Davies, 2005).


Clearly, despite the presence of written procedures and strong espoused

organisational values, in practice, the organisational culture leant towards

defensively protecting, at all costs, choices that had already been made, rather than

opening decisions up to scrutiny. Here, the vital workplace value of accountability

was missing.

2.2.3 Example 3: Poor decision-making processes and workplace harassment and bullying

According to evidence at the Inquiry, in practice, the organisational culture in

Queensland hospitals often manifests harassing behaviours that are out of sync with

the shared and espoused values of friendship, honesty, and compassion and care. In

conjunction with the allegations of substandard care, there was also evidence of a

culture of bullying in the workplace (Davies, 2005; Foster, 2005). The doctor at the

centre of the Inquiry was not the only one alleged to be bullying nurses and general

staff. During the Inquiry, it became evident that this behaviour was widespread at the

Bundaberg Hospital. This problem is not limited to this particular hospital or, indeed,

the health care sector (Davies, 2005; Foster, 2005). Workplace bullying is a serious

problem in Australia, as evidenced by the number of laws and policies that have been

put in place in recent times to address the phenomenon. A law in South Australia, for

example, created in 2005, has fines of up to AU$100,000 for employers who fail to

‘adequately manage’ bullying behaviours (Workplace Bullying, n.d, para 1). In the

UK, a study found that nurses are in the top three most bullied groups in the national

health sector, with one out of two nurses reporting bullying behaviours towards them

(Foster, Mackie, & Barnett, 2004). There are numerous studies that have addressed

bullying as a common and costly practice in organisations (Saunders, Huynh, &


Goodman-Delahunty, 2007; McMahon, 2000; Rayner & Cooper, 1997). It has been

estimated that workplace bullying in Australia costs $180 million in lost time and

productivity (Farrell, 2002); the cost is much higher in the United Kingdom: around

₤30 billion (Workplace Bullying, n.d). The Bundaberg Inquiry revealed that the

major reason for the large number of resignations of front line medical staff was the

existence of widespread intimidation, bullying, and victimisation (QH, 2005).

It is not hard to see that, apart from its direct negative psychological impact on staff

morale and lack of respect for persons, bullying behaviour seriously undermines

efficient and effective decision making. While it may be misguidedly aimed at

increasing compliance and efficiency, bullying not only promotes internal opposition

and subverts team cohesion but also undermines the rational basis of decision

making. As the Bundaberg Hospital case illustrates, there is a heavy toll paid in the

loss of staff and productivity. Such high staff turnover does not help to engender

commitment and consistency in ethical decision making. At a deeper level, bullying,

intimidation, and victimisation can be seen arising naturally in situations where there

is a lack of value congruence and where effective decision making guided by shared

values does not exist. Without the motivating power of shared values, direct

intimidation is used to achieve compliance.

While the Bundaberg Hospital example shows that when bad decisions have been

made the first reaction has often been to find a scapegoat to blame, bad decisions

have more likely been influenced by an endemic systemic malaise or unhealthy

organisational culture. However, it is not sufficient to shift the blame entirely to the


organisational level; rather, as Liedtka (1989) has argued, closer attention needs to be

given to the relationship between organisational and individual values in action.

The presence of strong individual staff values and strong espoused values—in line

with community expectations and backed up by legislation and ethics regimes—were

not, on their own, sufficient to ensure a healthy organisational culture and to prevent

unethical, possibly illegal behaviour in the Bundaberg Hospital. Somewhat

surprisingly, one review into the Queensland Health system, prompted by the events

at Bundaberg Hospital, even reported that ‘on occasions the Queensland Health

Code of Conduct had been used as a tool to bully or intimidate Queensland Health

staff’ (Foster, 2005, p. 58). It is plausible to suggest that when the values expressed

through everyday practices, such as bullying, contend with espoused values, such as

those embodied in the Public Sector Ethics Act 1994 (Queensland Government,

2010), and the Queensland Health Code of Conduct (QH, 2006), the health of the

organisational culture is weakened, and opportunities arise for individuals to

knowingly engage in wrongdoing without fear of reprisal.

2.3 Organisational culture and its link to ethical decision-making processes

When defining ‘unhealthy’ and ‘healthy’ organisational cultures it is useful to start

with a metaphor used by Aristotle when he posed the question: ‘What constitutes a

“good knife”?’ (Crisp, 2000). Aristotle defines goodness in terms of purpose. He

argued that the very function of a knife is to cut and, therefore, a good knife is a

sharp knife (Crisp, 2000). Similarly, it can be argued that the unique function of a

good organisational culture is to promote all those shared values, artefacts, and

behaviours that have been deemed acceptable within an organisation, region, or


country. Specifically, a healthy organisational culture actively promotes congruence

between the values of the organisation and the individuals working in it. Arguably,

then, an unhealthy organisational culture would be one that expresses values and

behaviours contrary to the shared values of staff members and the espoused

organisational values.

While Liedtka (1989) talks of ‘strong’ and ‘weak’ rather than ‘healthy’ and

‘unhealthy’ organisational cultures, the effects are similar. However, there is a subtle

difference. Liedtka has suggested that a strong culture refers to any culture that has a

strong ‘fit’ between individual and organisational values. Based on this definition,

the Mafia culture could well be a strong one, as long as the members’ values are in

line with the organisational values. A ‘healthy’ organisational culture, on the other

hand, does not simply refer to a culture that has a strong internal fit, but to a culture

that has a strong fit between the organisational and individual staff values and those

values widely shared in the broader community.

In diagnosing a ‘strong’ corporate culture we look for the existence of shared

meanings, beliefs, and values (Deal and Kennedy, 1982; Schein, 1985). The

more universal these understandings are among organizational members, the

stronger the culture. Conversely, a weak culture lacks such common themes.

Beliefs held by members are more diffuse (Liedtka, 1989, p. 806).

Strongly held individual values can aid decision making in the face of corporate

mixed messages, but ‘muddled organizational behaviour’ can also be exploited by

those ‘with little apparent sense of wrong-doing.’ (Liedtka, 1989).


Liedtka’s model has been extensively used by a number of researchers as a

framework to assess aspects of organisations, such as culture, work attitudes, ethical

practices, and motivation in terms of values congruence (Edwards & Parry, 1993;

Glover et al., 1997; Liedtka, 1989, 1992; McDonald & Gandz, 2006, Posner &

Schmidt 1993). Value Congruence Theory, as deployed by Liedtka (1989), has

focused mainly on the conflicts between individual and organisational values. In the

situation revealed in the Bundaberg Hospital Inquiry, however, there was a high level

of congruence between individual staff values and those espoused by the

organisation. It is the disjuncture between these individual and espoused values and

those put into practice in managerial decision making, that seem to have created the

opportunity for individuals to indulge in substandard practices with little awareness

of their wrongdoing.

Decisions are the building blocks of organisational climate or culture and can be

usefully described as choices guided by values. The consistent application of values

through decision-making procedures replicates the organisational culture across time

and space. Just as DNA encodes information from one generation to another, so too

is a recognisable organisational culture transferable from one generation to another

and from one place to another through the transmission of values. ‘Organizational

culture is the personality of an organization’ (Coomer, 2007; McNamara, 1999) and

it comprises the assumptions; values; norms; and tangible signs (artefacts) of the

organisation, members, and their behaviours (Burnes, 2004). The concept of culture

is particularly important when attempting to manage organisation-wide change

(Burnes, 2004; McNamara, 1999). Decision makers are coming to realise that,

despite the best-laid plans, organisational change must include not only changing


structures and processes, but also changing the corporate culture (Burnes, 2004).

Trevino and Nelson (2004), for example, have argued that, in setting the standards

for assessing the rightness of an action, not only are the individual values of the

decision maker important, but also other factors, such as organisational culture, play

a very important role.

Organisational culture is made up of values; more specifically, by preferences for

tangible and intangible outcomes, that are considered important by individuals (Dion,

1996). It is possible to identify three sources of values that equally can influence the

organisational culture and, indirectly, the managerial decision-making process: (1)

individual values, (2) espoused organisational values and (3) those values embedded

in the daily practice of the organisation. The individual values that might have been

present in the Bundaberg Hospital can be inferred from the results of a study of 1800

staff from two major tertiary hospitals undergoing amalgamation in Queensland, the

state in which the Bundaberg Hospital is situated and also part of the same

organization (Queensland Health). This study indicated five main staff values: care

and compassion, integrity, honesty, professionalism, and dignity (Mason & Wilson,

1999). Similar staff values were found by an independent review of the Queensland

health system (Foster, 2005). Also, due to the fact that the Bundaberg Hospital is a

public hospital, the two main sources of espoused organisational values were the

Public Sector Ethics Act 1994 (Queensland Government, 2010) and the Queensland

Health Code of Conduct (QH, 2006), which both promote values such as respect for

persons; integrity; respect for the law; and system of government, diligence, and

economy and efficiency.


Despite the existence of these espoused clues, however, the Queensland Public

Hospitals Commission of Inquiry into failings in the Queensland Health system

found that the actual organisational culture was far removed from these espoused

values. From the Queensland Public Hospitals Commission of Inquiry Report

(Davies, 2005; Foster, 2005) it appears that the organisational culture was, in fact,

characterised by bullying and a fear of standing up for issues that might not be in the

best interests of the organisation in fulfilling its core business of taking care for the

sick. The Queensland Health Systems Review Final Report noted that the staff of

Queensland Health referred to the organisational culture as ‘tribalism’, ‘tokenistic

consultation’, ‘no teamwork focus’, and ‘a culture based on power and control’

(Foster, 2005, p. 56). This is precisely the type of muddled organisational behaviour,

or lack of value congruence at the organisational level that Liedtka indicated was

open to exploitation (1989).

2.4 Aligning personal and organisational values: The Value Congruence Model

As previously discussed, there can be a significant gap between what staff personally

hold to be important values, what values are espoused by the organisation, and what

values are actually practised and supported within the organisation (Kabanoff,

Waldersee, & Cohen, 1995). As highlighted by the examples in section 2.2, staff are

often presented with a conflict between their individual values, the organisational

values publicly espoused, and those internally practised from day to day. Scott and

Hart (1979) suggest that, in such a situation, the principle of ‘organizational

imperative’ (p. 62) comes into play—employees have to obey the organisation and,

in doing so, personal values are put aside and organisational values prevail.


Liedtka provides a more in-depth analysis on the potential conflict between

organisational and personal values (1989). Using a Value Congruence Model,

Leidtka argued that individual values and organisational values can be either

‘consonant’ (clear and in line with each other) or ‘contending’ (ambiguous, and not

in line with each other) (1989, p. 808). Liedtka (1989) assessed the possible

combinations that can result from a two by two matrix (Figure 2.1) and concluded

that there are five possible ways that a manager can behave. Using this matrix it is

possible to map how a manager might make a decision in the five possible situations

that arise out of the four quadrants of the analytical matrix (Liedtka, 1989, pp. 808–

811). In Quadrant I, for example, the organisational values are clear to the manager;

however, the manager identifies an internal conflict (for example, between caring for

the patients and cutting costs). In Quadrant II, the organisational values are more

ambiguous (the company’s public statements sometimes conflict with internal

messages and realities) and conflict with personal values as well; therefore, the

manager in this situation would tend to make a decision according to how his or her

peers have done before (Groupthink). In Quadrant III, the manager has no internal

conflict (strong individual values), and the organisational values can either (A)

coincide or (B) differ from the manager’s values. Finally in Quadrant IV, which is

characterised by no internal conflict (strong individual values), but, in the presence

of ambiguous messages from the organisation, the manager would tend to fight for

his or her values (political behaviour). According to Liedtka’s model, however, if

organisation values are contending, strong individuals can exploit the situation to

their own advantage.


Figure 2.1 Individual and organisational values matrix

(Adapted from Leidtka, 1989)

Applying this matrix to the examples from the Bundaberg Hospital Commission of

Inquiry findings, it is clear that individual staff values such as care and compassion,

honesty, integrity, and professionalism, while congruent with the espoused values of

Queensland Health, were in strong conflict with the organisational values expressed

in the organisational culture—bullying and harassment, no teamwork, and tokenistic

consultation. The conflict between espoused organisational values and organisational

culture renders organisational values ambiguous. Respect for people; integrity; the

law; and the system of government, diligence, and economy and efficiency are the

most common espoused values promoted by the Queensland Health Code of Conduct

(QH, 2006) and by the Public Sector Ethics Act 1994 (Queensland Government,

2010). Internally, in practice, much less virtuous values are supported, such as

bullying and power games. In this scenario, some decision makers who lack coherent

individual values are likely to retreat to Quadrant II and be strongly influenced by

what their peers are doing rather than basing their decisions on espoused values or

even their own ethical frameworks.


Based on Liedtka’s (1989) model, a healthy organisational culture is one that fits into

Quadrant III, which is characterised by internally consistent individual values and

espoused organisational values consonant with those expressed in practice. To

further understand the validity of Liedtka’s (1989) model, we need to understand that

her Value Congruence Model does not assume ethical principles or values, only

consonant ones. Her model simply analyses the congruencies between the different

set of values (individual, organisation-espoused, and in-practice). The Mafia could

well be in the third quadrant because the different sets of values are consonant, but

overall it engages in unethical and illegal activities. As has been outlined, the

organisational culture revealed in the Bundaberg Hospital Commission of Inquiry is

at the exact opposite (Quadrant II) of Quadrant III because the individual and

organisational espoused values are promoting values such as friendships, care, and

compassion: values that are in conflict with those outlined by the organisational

culture, as illustrated by the report from the Queensland Health System Review,

which found that

…bullying, and intimidation on the one hand, and blaming and avoiding

responsibility on the other typify part of Queensland Health’s culture.

Descriptions such as “tribalism”, “tokenistic consultation”, “no culture of

teamwork” and a “culture of power and control” were repeated themes

throughout the consultation. (Foster, 2005, p. 56).

In view of this lack of value congruence, it is not surprising, then, that many poor

decisions were made in such an unhealthy organisational culture.


2.5 Moving beyond a value congruence model

To resolve the situation outlined in the previous examples, it is vital to move from

Quadrant II and Quadrant IV (Figure 2.1)—which characterise the conflict between

individual and espoused organisational values and the ones internally used—to

Quadrant III. Nevertheless, the issue goes beyond value congruence. A healthy

organisational culture is not only strong and coherent, it is a good in the ethical sense

as well. In order to successfully promote change and, more specifically, to change

corporate culture, it is paramount to adopt, in practice, foundational ethical values,

which are in line with the staff values and the espoused organisational values. Ethics

ought to be present in decision making at every level of the organisation. As

discussed, the main source of the values conflict is not the clash between individual

values and the espoused ones, but from the clash of these two with those informally

and internally adopted in an unhealthy organisational culture and become the driving

values in everyday decision making.

To achieve much better decision making in an organisation, the everyday influence

of these informal, but nonetheless powerful, unhealthy values must be replaced with

more ethical ones. This cannot be achieved by formal ethics regimes alone; after all,

the espoused values are often well in place and clear. There always remains a crucial

role for individual managerial decision-makers to play. However, changing the

values in hierarchical and geographically widespread organisations, such as health

care systems, is not an easy or quick task (Campbell, 2004). Every day, in different

locations around Queensland, hundreds of decisions are being made within the

Queensland Health and, more importantly, these decisions are being made by

individuals who may have consciously or subconsciously embedded unhealthy


values into their everyday decision-making processes. Therefore, in order to help

managers make better decisions, it is vital to provide them with a clear understanding

of the values that are not only shared across the organisation but are also meant to

guide their everyday decision making.

2.6 Conclusion

In an organisation such as Queensland Health, which employs in excess of 60 000

employees (QH, 2009), there would be hundreds of thousands of decisions being

made every day as well as manifold interpretations of the Queensland Health Code

of Conduct and the Public Sector Ethics Act 1994. It is not surprising that mistakes

can and do occur. The real tragedy revealed in the Bundaberg Hospital Commission

of Inquiry is not simply that Queensland Health did not practise what it preached, but

that this very lack of value congruence at the organisational level seems to have

allowed a rogue individual to opportunistically exploit the situation with devastating

consequences for staff and patients and their families.


Chapter 3

An evidencebased taxonomy of factors

influencing ethical decision making: A critical

response to the current literature

3.1 Abstract

A significant gap in the theoretical literature has been revealed by a critical analysis

of more than 40 years of research on factors that influence ethical decision making.

A large number of factors have been studied independently, and a few together, but

there are no genuinely multidimensional studies. Based on the survey of past

research, this paper presents a taxonomy of factors that influence decision making as

a guide to future research. Four main categories have been developed based on the

nature of the influencing factors: ethical, individual, organisational, and external.

This paper will discuss the implications and limitations for future research.

3.2 Introduction

In recent years, due to the increasing number of corporate scandals, researchers’ and

practitioners’ interest in business ethics has grown from only a few articles being

published in mainstream business journals to becoming a stand-alone discipline with

its own top-tier specialised business ethics journals such as the Journal of Business

Ethics, Business Ethics Quarterly, and Business Ethics: A European Review. One of

the areas that has received a great deal of attention is ethical decision making

(O’Fallon & Butterfield 2005; Loe, 1994). Research on ethical decision making in


business, however, is not a new topic. Raymond Baumhart (1969) published an

article about the importance of researching and teaching business ethics; Bohr and

Kaplan (1971) investigated the reasons behind health care workers’ protests and

concluded that the main issue was a conflicting view about the delivery of health

care services, or what the author referred to as a ‘complex ethical decision-making

issue’ (Bohr & Kaplan, 1971, p. 2234). Since these two papers were published, more

extensive research has been carried out on ethical decision making (O’Fallon &

Butterfield, 2005; Loe, Ferrell & Mansfield, 2000; Ford & Richardson, 1994).

Different approaches have been taken: some researchers developed models to

describe ethical decision making (Ferrell, Gresham, & Fraedrich, 1989; McDevitt,

Giapponi, & Tromley, 2007; Rest, 1979; Trevino, 1986); others focused on how to

implement ethical regimes such as codes of ethics in organisations (Svensson &

Wood 2007; Coughlan, 2005; Wood, 2000). A great deal of research has also been

published on the factors that can influence ethical decision making (O’Fallon &

Butterfield, 2005; Loe et al., 2000; Ford & Richardson, 1994). To date, however, no

research has collated all of these influencing factors and mapped them into a

taxonomy that can help managers better understand the complex construct of ethical

decision making. Therefore, the aim of this paper is to bring the current knowledge

about factors influencing ethical decision making to the next level by developing a

comprehensive taxonomy based on a critical review of more than 40 years of

relevant literature. To develop this taxonomy, a three-step process has been followed.

The first step is to provide an overview of the literature on factors influencing ethical

decision making, the second step is to classify factors influencing ethical decision

making into mutually exclusive categories, and the last step is to discuss their degree

of influence on ethical decision making.


The following section will discuss in detail the three developmental steps towards the

evidence-based taxonomy of factors influencing ethical decision making.

3.2.1 An overview of the literature on factors influencing ethical decision making

To cover the literature to date on factors influencing ethical decision making, this

paper combines the results of three major reviews of ethical decision-making

literature from 1962 to 2003 and an additional review of the remaining research from

2004 to 2010 (Table 3.2). The three major reviews incorporate more than 300 articles

from the literature on factors influencing ethical decision making in business from

prominent academic journals in the field of management, marketing and psychology

(Table 3.1).


Table 3.1 List of academic journals reviewed

Journal title Journal title Journal title

Academy of Management Journal

Strategic Management Journal

Organizational Behaviour and Human Decision Processes

Business Ethics Quarterly Journal of Business Research

Journal of Business Research

Journal of American Academy of Business Cambridge

Accounting Auditing and Accountability Journal

Journal of Business Ethics Public Opinion Quarterly

Journal of Organizational Behaviour

Journal of Counselling and Clinical Psychology

International Journal of Management

Journal of Education for Business

Journal of Macromarketing Journal of Management Studies

International Philosophical Quarterly

Journal of Management Issues Journal of Applied Social Psychology

Journal of Selling and Sales Management

Journal of Marketing Administrative Science Quarterly

Research in Organizational Change and Development and Business and Societies.

Journal of Research in Personality

Human Relations Academy of Management Review

Managerial Auditing Journal European Journal of Marketing

Journal of Academy of Marketing

The additional review incorporates 98 articles published between January 2004 and

January 2010 from academic journals similar to the previous reviews. O’Fallon and

Butterfield (2005), reviewing the empirical literature on ethical decision making

published between 1996 and 2003, found that 174 studies had been carried out.

Comparing these findings with earlier studies by Ford and Richardson (1994) and

Loe et al. (2000), it is clear that interest in ethical decision making is on the rise

(Table 3.2). What is important to note is that 273 articles have been published

between 1996 and 2010, while only approximately 110 were published between 1961

and 1994, suggesting that research interest on factors influencing ethical decision

making has more than doubled in the past 15 years.


All of the studies presented by the three reviews (O’Fallon & Butterfield, 2005; Loe

et al., 2000; Ford & Richardson, 1994) as well as the one that this paper has provided

(Table 3.2) are focused on ethical decision making in the business arena. However,

they differ in the method used to test theory, the factors tested, and the sample used.

In relation to the methods used, around half of the studies used responses to

scenarios, vignettes, or ethical dilemmas purposely developed by the researchers; the

next most common method was questionnaire research (O’Fallon & Butterfield,

2005; Loe et al., 2000; Ford & Richardson, 1994). A significantly smaller number of

studies asked respondents about ethical dilemmas that they have encountered at their

workplace (Marshall & Dewe, 1997), or asked the respondent for a self-assessment

of their own ethical behaviour in the workplace (McCabe, Trevino & Butterfield,

1996).

The factors surveyed range from individual factors such as age, gender, education,

and stage of moral development (O’Fallon & Butterfield, 2005; Ford & Richardson,

1994) to organisational factors such as organisational climate (Victor & Cullen,

1988), organisational size (Browning & Zabriskie, 1983), and codes of ethics

(Robertson & Schlegelmilch, 1993). Different cohorts have been targeted by

researchers to test their constructs, with the majority being either managers and

professionals samples (Jackson, 2000; Murphy, Smith & Daley, 1992) or students

(Trevino & Youngblood, 1990; Hegarty & Sims, 1979).


Table 3.2 A comparison of factors in reviews of the literature on ethical decision making 1962-2010

Factors influencing EDM Ford & Richardson: from 1972 to 1992

Loe et al.: from 1961 to 1994

O’Fallon & Butterfield: from 1996 to 2003

Casali: from 2004 to 2010

Religion 3 3 10 11

Nationality 6 0 25 18

Sex/gender 13 26 49 24

Age 8 15 21 7

Education, Job satisfaction, and Work experience

23 16 41 19

Personality values 3 10 13

Locus of control 2 4 11 4

Role of conflict ambiguity 1 ‐

Authority 1 0 5

Cognitive moral development 6 23 3

Philosophy/value orientation 2 21 42 26

Significant others 11 9 1

Peer group influence 5 2

Top management influence 4 7

Rewards‐sanctions 4 15 4

Codes 9 17 9

Ethical conflict 1 2

Organisational culture or climate 1 18 11

Organisational effect 5 1

Organisation size 3 1

Organisation level 3 6

Industry types 3 10

Business competitiveness 2 1

Total* 102* 154* 200* 175*

* Totals do not indicate the total number of articles. They represent the total number of findings by each independent variable (influencing factor). The total number of studies included is around 380. Also, the reviews by Ford & Richardson and Loe et al. cover overlapping time periods.

While these studies have greatly contributed to the current knowledge about factors

influencing ethical decision making—by bringing specific information about the

degree and nature of influence that each of these factors has on ethical decision

making—a common denominator across all of the studies is their narrow scope of


analysis; only a few factors have been tested together at any given time. Managerial

ethical decision making, however, is a complex and multidimensional process,

strongly characterised by subjective interpretation and intricate combination of

different factors (Bazerman, 2005). Therefore, as a first step to addressing the lack of

a multidimensional approach in the existing research, this study presents an

evidence-based taxonomy that takes into consideration the large number of factors

that can influence ethical decision making.

3.3 Classifying factors influencing ethical decision making

To give structure and clarity to this evidence-based taxonomy, it is important to

classify all of these influencing factors into mutually exclusive categories based on

the nature of their influence. For the purpose of this study, four mutually exclusive

categories will be used to summarise the large number of influencing factors: ethical

factors, individual factors, organisational factors and external factors. These four

categories encompass all of the possible influencing factors: they cover all factors

that are of an ethical or moral nature; all factors that are part of the individual such as

age, gender, and education; all factors related to the organisation such as code of

ethics and training; and all factors that are external to the above categories such as

economic, political, social, and competitive.

These four categories do not only exhaustively summarise all of the possible factors

influencing ethical decision making, but also reflect categories that have been used in

many models of ethical decision making such as: institutional factors (James, 2000),

ethical philosophies (Stead, Worrell & Stead, 1990), personal factors (Painter-

Morland, 2001), organisational actions (McDonald & Nijhof, 1999), individual level


(McDonald & Nijhof, 1999), external forces (Stead et al., 1990), organisational

factors (Stead et al., 1990), individual factors (Ferrell, Gresham & Fraedrich, 1989).

These four categories also reflect the three levels of influence that are commonly

discussed in decision making: micro (individual), meso (organisational), and macro

(society/external) (Dopfer, Foster & Potts, 2004; Erez & Gati, 2004; Enderle, 1997).

These three levels are further supported by the combination of three previously

discussed reviews of the literature on ethical decision making and models of ethical

decision making. Three literature review papers (Table 3.2) have used categories

such as individual/personal and organisational to summarise the influencing factors

(O’Fallon & Butterfield, 2005; Loe et al., 2000; Ford & Richardson, 1994). The

following section discusses in detail each of the factors influencing ethical decision

making and their degree of influence by the categories previously outlined.

3.3.1 The degree of a factor’s influence on ethical decision making: Ethical factors

It is important to note that the research emphasis on ethical factors (philosophy and

value orientation) has increased dramatically in the past 10 years: studies increased

in number from only two studies reported by Ford and Richardson (1994), 21 studies

reported by Loe et al. (2000), 42 studies reported by O’Fallon and Butterfield (2005),

to 26 studies being done within the past five years. Table 3.2 suggests that ethical

factors have moved from being the least researched topic (Ford & Richardson, 1994)

to being the second most researched one (Loe et.al, 2000; O’Fallon & Butterfield,

2005). This significant increase of research into ethical factors is the main reason for

ethical factors to be included in this study’s proposed taxonomy as a stand-alone

category rather than as an individual factor.


The range of ethical factors studied has also increased over the years. For example,

only two studies on ethical factors were reported by Ford and Richardson (1994),

which produced mixed results about the influence that economic and political values

have on ethical decision making. However, O’Fallon and Butterfield (2005) have

reported that idealism and deontology generally influence ethical decision making in

a positive way—supporting some of the findings of previous limited research—and

also that economic factors are negatively related to ethical decision making. In recent

years, researchers have expanded their research scope on this matter by looking at

different ethical factors, a situation that has revealed a number of interesting results

such as Bhuyan’s (2007) support of the important role that individual virtue and

strength of character play on ethical decision making, and (Palermo & Evans, 2007)

suggestion that different personal values were significant predictors of reported

behavioural choices on respective ethical scenarios. In their study of small business

managers, Marta, Singhapakdi, and Kraft (2008) found that neither idealism nor

relativism were significant predictors of a small business manager's ethical

intentions, a result that may suggest that what determines ethical behaviour for small

business managers is not an individual's personal moral philosophy, but the

individual's specific attitude toward specific ethical situations. Jewe (2008) was

interested in ascertaining the effectiveness of ethics courses on influencing individual

moral values, and suggesting that current courses have limited value in affecting

ethical attitudes. Also, Fritzsche and Oz (2007) found a significant positive

contribution of altruistic values to ethical decision making and a significant negative

contribution of self-enhancement values to ethical decision making. Vitell and

Patwardhan (2008) discovered that marketing practitioners from United Kingdom,


Spain, and China use perceived harm construct (e.g. magnitude of consequences,

probability of effect, temporal immediacy, and concentration of effect) to determine

intentions in situations involving ethical issues. West (2008) provided a discussion

using a model based on Jean-Paul Sartre’s existentialism—the concept of individual

freedom and responsibility or what he calls subjective experiences and personal

situations. Another factor that has been studied is decision-making support system,

which can provide some guidelines to people in dealing with ethical dilemmas

(Mathieson, 2007). Also, individual mood has been found to influence ethical

decision making, and, more specifically, that negative mood is associated with

decreased intention to act ethically (Curtis, 2006).

3.3.2 The degree of a factor’s influence on ethical decision making: Personal factors

In this study, personal factors are those factors that are directly related to the

individual decision maker and that can influence ethical decision making. Ford and

Richardson (1994) argue that these factors can be sub-divided into two groups: (1)

individual factors related to birth such as gender, nationality, age, and (2) individual

factors related to human development and interactions with others such as religion,

employment, cognitive moral development (CMD), education, and professional

experience.

Starting with those individual factors that are directly related to birth, the first one is

gender or sex. The findings from three different reviews of the effects of gender on

ethical decision making are mixed. For example, Ford and Richardson (1994)

reported that of 14 studies on gender, seven concluded that, in some situations,


females were more likely than males to act ethically, while the remaining seven

studies did not find any differences. Loe et al. (2000) counted 26 studies that have

discussed gender in relation to ethical decision making. They found that the majority

of them did not establish any major differences between male and female behaviour;

only a few of the studies suggested that females act slightly more ethically then

males. O’Fallon and Butterfield (2005) also reported that out of 49 studies on gender

and ethical decision making, most commented that there are few or no significant

gender differences. In the most recent literature, the findings seem to be more

consistent (O’Fallon & Butterfield, 2005) in relation to the degree of influence that

gender plays on ethical decision making; the vast majority of the studies found

gender influential (Bampton & Maclagan, 2009; Bernardi & Guptill, 2008; Lund,

2008; Wilborn, Brymer, & Schmidgall, 2007; Ritter, 2006; Scott-Hunt & Lim, 2005;

Doty, Timkiewicz, & Bass, 2005; Roxas & Stoneback, 2004; Kujala & Pietilainen,

2004), only two studies found it non-influential (Hartman, Fok, & Zee, 2009; Marc

& Vera, 2006), and three studies have yielded mixed results (Nguyen, Basuray,

Smith, Kopka, & McCulloh, 2008; Valentine & Rittenburg, 2007; McCabe & Rhea,

2006). For example, Hartman, Fok, and Zee (2009) found significant gender

differences in both reported levels of ethical behaviour and in approach to ethical

decision making, with males being more willing to engage in unethical behaviours

than female.

Another individual factor is nationality; however, its effects on ethical decision

making are also ambiguous. Of 25 studies reviewed by O’Fallon and Butterfield

(2005), five by Ford and Richardson (1994) and six from Loe et al. (2000), there

have been either mixed results or reports of no significant differences across the


different cultures. Some studies pointed out differences such as: US managers rating

ethical issues higher than UK managers (Robertson & Schlegelmich, 1993), cultural

environments affecting the individual perception of ethical situations (Armstrong,

1996), and French managers expressing more faith, compared to others around the

globe, that codes of conduct are an important tool in promoting ethical behaviour

(Becker & Fritsche, 1987). Once again, recent research is less ambiguous about the

importance that nationality plays on ethical decision making, with only one study

reporting no significant findings (Mustamil & Quaddus, 2009), and two that have

yielded mixed results (Singh, Vitell, Alkhatib & Clark III, 2007; Knapp &

Vandecreek, 2007). However, most of the research has supported that nationality is

an influential factors in ethical decision making (Patel & Schaefer, 2009; Oumlil &

Balloun, 2009; Beekun, Hamdy, Weaterman, & Hassebelmaby, 2008; Donald, 2006;

Frame & Williams, 2005; Srnka, 2004). For example, in a recent paper by Oumlil

and Balloun (2009) significant differences were found between American and

Moroccan managers in terms of their predisposition to make ethical decisions, and

Donald (2006) argued that ethnic culture serves as one determinant in classifying a

particular action as either ethical or not ethical.

Using Ford and Richardson’s (1994) sub-division, the final individual factor related

to birth is age. Again, there are mixed results. For example, only three out of eight

studies reviewed by Ford and Richardson (1994) revealed any difference between

younger and older people in relation to ethical decision making; although, one of

these three studies (Browning & Zabriskie, 1983) argued that younger purchasing

managers were more ethical than older ones. Loe et al. (2000), however, had more

promising results: out of eight studies not previously included in Ford and


Richardson’s (1994) paper, all but one showed a significant correlation between age

and ethical decision making. Two of the seven studies that have been reviewed by

Loe et al. (2000) found that older people and those later in their careers acted more

ethically than younger ones (Kelley, Ferrell, & Skinner, 1990; Barnett & Karson,

1989). However, in the literature review on ethical decision making by O’Fallon and

Butterfield (2005), there are again mixed results, with five studies arguing that there

was a negative relation; eight, no relation; and six, a positive relation. Also, there are

mixed results from the most recent literature: two studies (Shawver & Sennetti, 2009;

Callen-Marchione & Ownbey, 2008) found significant support of the influence of

age on ethical decision making, one study yielded mixed results (McMahon &

Harvey, 2007), and one study found no significance (Almerinda, 2004). The aim of

the study that yielded mixed results was based on manipulated and perceived moral

intensity on ethical judgment (McMahon & Harvey, 2007). The expected findings

were that, in between-subjects studies, participants would judge actions taken in

manipulated high moral-intensity scenarios to be less ethical than the same actions

taken in manipulated low moral-intensity scenarios. The findings were mixed for the

effect of perceived moral intensity.

With respect to the individual factors related to human development and interactions

with others, the first one is religion. Eight out of 10 studies have reported that

religion had a positive influence on ethical decision making (O’Fallon & Butterfield,

2005). This is a far better result than that found by Ford and Richardson (1994), and

confirmed by Loe et al. (2000), where only one out of four studies found any

relationship. A study carried out by Giacolone and Jurkiewicz (2003) found that

individual perceptions as to whether a questionable business practice is ethical or


unethical differ instrumentally according to the degree of individual spirituality of

the respondents. Recent studies vary on the degree of influence that religion has in

ethical decision making, from weak (Kurpis, Beqiri, & Helgeson, 2008) to strong

(Vitell & Bing, 2009; Angelidis & Ibrahim, 2004; King, 2007), with Keller, Smith,

and Smith (2006) finding that religion was the strongest factor influencing ethical

decision making in their sample. Another interesting argument about the importance

of religion in ethical decision making is provided by Young (2007). He discusses the

important role that fiduciary duties, based on Judaeo-Christian biblical writings and a

theory of office descending from Cicero and Roman legal arrangements, plays on

ethical decision making (Young 2007).

Kohlberg’s Cognitive Moral Development (CMD) theory is another individual factor

which is part of the subgroup of factors related to human development and

interactions with others. CMD has been extensively tested in the literature. Between

1996 and 2003, there were at least 23 research studies exploring the relationship

between CMD and ethical decision making that found a positive relationship. This

number represents more than 10% of the total studies examined during that period

(O’Fallon & Butterfield, 2005). It has been argued that the higher the stage of CMD,

the higher the likelihood of making an ethical decision. Out of 23 findings reported

by O’Fallon and Butterfield (2005), 19 supported the idea that CMD influenced

ethical decision making. Fifteen of these studies encountered a positive relationship

between the stages of moral development and the likelihood of making an ethical

decision. For example, Bateman, Fraedrich, and Iyer (2003) found that there is a

weaker influence in relation to moral judgment when cost benefit-based reasoning

was used rather than rule-based reasoning. On the other hand, Au and Wong


(2000)—based on their investigation of professional accountants in Hong Kong—

argued that CMD has an impact on ethical decision making. However, they also

argued that the CMD can be influenced by other factors such as the Guanxi.

Generally, the term Guanxi in Chinese means ‘relationships’; however, in a business

sense, it refers to those business networks that are extremely important when dealing

with Chinese corporations (Au & Wong, 2000). Most recent literature on CMD’s

influence on ethical decision making has found that the level of ethical maturity of

African-American business professionals was not significantly different based on

age, gender, and ethical training; however, it was significant in relation to formal

education level (Evans, 2005). Another interesting argument made by Ashkanasy,

Windsor, and Trevino (2006), is that managers with low cognitive moral

development who expected that their organisation condoned unethical behaviour

made less ethical decisions, while managers with high cognitive moral development

became more ethical in their environment. However, Loescher (2004) found that the

impact of formal education on ethical maturity levels of African-American business

professionals is not always significant, but that other factors such as being a tenure

student and academic performance measured in terms of their grade point average

(GPA) can affect the individual’s moral development.

Following the classification methods of the three previous reviews (O’Fallon &

Butterfield, 2005; Loe et al., 2000; Ford & Richardson, 1994) the next individual

factor is a combination of factors such as education, job satisfaction, and work

experience. Overall, this category of factors was the seventh most researched factor

and the third most researched between 1996 and 2003, according to the reviews:

O’Fallon and Butterfield (2005), 41 studies; Loe et al. (2000), 16 studies; and Ford


and Richardson (1994), 23 studies. Again, the findings are mixed across the three

reviews. Jones and Gautschi (1988) discovered that masters-degree students were

less likely then bachelor-degree students to exhibit a loyalty response. Browning and

Zabriskie (1983) reported that managers with higher education were more likely to

judge gift giving as an unethical practice than managers with a lower education level.

On the other hand, McNichols and Zimmerer (1985), after surveying 1,178

undergraduate students in relation to 10 ethical scenarios, concluded that there were

no significant differences in relation to educational level (first-year students and

final-year students). Dadisho (2005) supported the idea that people with higher

education levels would score higher on moral development than less educated

people. More recent research on education as an influencing factor has revealed that

not only is there a significant difference between first-year and final-year students

but also that there could be an internal difference within first-year and final-year

cohorts (O’Leary & Pangemanan, 2007; Hall & Berardino, 2006). For instance, it has

been found that senior accounting students have performed significantly different

when asked to participate to a group decision-making simulation scenario than when

they were asked to make an individual choice (O’Leary & Pangemanan, 2007).

When part of a group, the outcome of senior accounting students dealing with ethical

conflict tended to be more moderated as a result of consensus; however, when they

were asked to make a decision individually in a similar situation, they were more

inclined to take the extremes options—unethical or ethical (O’Leary & Pangemanan,

2007). Another interesting finding is presented by Hall and Berardino (2006) who

suggest that young adults (first-year undergraduate students) are influenced by their

attitudes in the way that they perceive an ethical situation. In relation to professional

experience, on one hand, Kidwell, Stevens, and Bethke (1987) argued that the greater


the working experience, the higher the likelihood of ethical behaviour, and Weeks,

Moore, McKinney, and Longenecker (1999) discovered that individuals in the latter

stage of their careers were more inclined to make moral decisions. On the other hand,

Serwinek (1992) did not find significant correlation between years of professional

experience and ethical perception of 421 small-business staff surveyed. However,

Gunz and Gunz (2008) found that well trained and highly professional people find

ways to minimise perceived conflict between their profession and organisational

obligation, which results in a biased capacity to judge ethical situations.

3.3.3 The degree of a factor’s influence on ethical decision making: Organisational Factors

Organisational factors comprise all of those factors inherent to a particular enterprise

that are, in some degree, able to influence individual ethical decision making. The

most common organisational factors are: codes of ethics and codes of conduct,

rewards and sanctions, organisational climate and culture, industry type,

organisational size, referent groups, and training. Research interest in the impact that

codes of ethics or codes of conduct have on ethical decision making has been

increasing. Nine studies were recorded by Ford and Richardson (1994), which

increased to 17 in 2000 (Loe et al., 2000) and 20 in 2005 (O’Fallon & Butterfield,

2005). There is agreement across these three reviews that codes of ethics and codes

of conduct are influential factors in ethical decision making (O’Fallon & Butterfield,

2005; Loe et al., 2000; Ford & Richardson, 1994). Arguably, codes increase ethical

awareness in organisations and stimulate reporting of unethical behaviours (Barnett,

Cochrane & Taylor, 1993; Barnett, 1992). Peterson (2002) and Somers (2001)

argued that organisations that had a code of ethics acted more ethically than those

without them. Conversely, Murphy et al. (1992) concluded from surveying 149


companies that codes of ethics had made little contribution towards predicting ethical

behaviour. Recent papers have supported the fact that codes of ethics are important

in setting up guidelines to enhance managerial ethical decision making (Ingram,

LaForge & Schwepker, 2007; Rottig & Heischmidt, 2007; Coughlan, 2005; and

Frame & Williams, 2005). For example, Coughlan (2005) argued that codes of

conduct in most cases provided decision makers with a reasonable justification in

resolving an ethical dilemma. However, a word of caution comes from Frame and

Williams (2005), who iterate that codes are effective as long as they are reflecting the

current internal and external context. In their analysis of the code of ethics and

standards of practice of the American Counseling Association, they found that that

the code did not adequately address the demands of working with non-white, non-

western clients (Frame & Williams 2005).

The next organisational factor is rewards and sanctions. Interestingly, the number of

studies that have included this factor as influential in ethical decision making has

decreased in the past decade, from 15 studies in 2000 (Loe et al., 2000) to only eight

studies in 2005 (O’Fallon & Butterfield, 2005). From the last literature review

articles on ethical decision making included in this paper (O’Fallon & Butterfield,

2005), it has been reported that only one out of eight studies found no significant

relation between rewards and sanctions and ethical decision making. In particular,

rewarding unethical behaviour was more strongly correlated with engaging in

unethical behaviour than rewarding ethical behaviours was with acting ethically

(Baumhart, 1961). Furthermore, Tenbrunsel (1998) argued that individuals working

under higher incentive conditions are more likely to engage in unethical behaviours.

Conversely, Hunt, Kiecker, and Chomko (1990) have argued that neither reward nor


sanctions are strongly associated with acting socially responsible. More recently, Nill

and Schibrowsky (2005) discovered that perceived moral intensity is directly

influenced by rewards and sanctions, and also Watson and Berkley (2009) argued

that rewards and sanctions can moderate or influence personal values in relation to

assessing compliance between situational factors and unethical decisions.

Over the years, the focus on organisational climate and culture in relation to ethical

decision making has dramatically increased from one major study by Victor and

Cullen in 1988, reported by Ford and Richardson (1994); four studies reported by

Loe et al. (2000); and 16 studies reported by O’Fallon and Butterfield (2005). This

trend has been based on strong empirical findings (12 out 16 studies) that have

consistently reported a strong relationship between organisational climate or culture

and ethical decision making (O’Fallon & Butterfield, 2005). Victor and Cullen

(1988), using a three by three matrix of three ethical criteria (egoism, benevolence,

and principle) and three loci on analysis (individual, local, and cosmopolitan), have

argued that there are at least five organisational climates that are positively correlated

to ethical decision making. This position has been backed up by Bartels, Harrick,

Martell, and Strickland (1998). Surveying 1,078 human resource managers, they

found a statistically significant positive relation between the strengths of an

organisation’s ethical climate and its success in responding to ethical issues. On the

other hand, DeConinck and Lewis (1997) found that organisational climate was not

significant when tested as a predictor for managers’ intention to intervene in cases of

ethical and unethical sales force behaviours.


Recent literature not only supports the fact that organisational culture is a factor that

can strongly influence ethical decision making (Ampofo, 2005), but also provides a

number of strategies on how to manage an ethical culture such as: a) strengthening

the code of ethics, which it is important to embed into the organisational climate via

an effective communication process (Stevens, 2008), b) promoting positive ethical

behaviours (Ferrell, Fraedrich, & Ferrell, 2008), c) using positive reward

mechanisms supporting ethical behaviours (Bowen, 2004), and d) providing ethical

training (Sekerka, 2009).

Even though only one out of nine recent studies concluded that there was no

significant relation between industry type and ethical decision making (O’Fallon &

Butterfield, 2005), and one out of three previous studies (Ford & Richardson, 1994),

there is still not a clear indication of that relationship. This particular factor has not

been studied in depth, especially not by comparing different industry types in the

same study. Nevertheless, it has been argued that auditors, for example, have a

particular predisposition for economic and utilitarian principles in their decision-

making processes, characteristics that tend to be industry-based rather than

individual-based (Shafer, Morris, & Ketchand, 2001). This argument suggests that

the idea that different industries can have unique characteristics and principles in

ethical decision making, which ultimately have an impact on ethical decision

making, is still worth further exploration. However, recent research articles have

found that different industries might have significant differences when it comes

down to ethical decision making: a) in the information technology industry, great

attention is given to legal aspects and intellectual property is seen as a strong

contributor for a competitive advantage (McGowen, Stephens & Gruber 2007); b)


the health care industry is mostly driven by a coherent and logical ethical decision-

making solution (Victor, 2007); c) in the retail industry, friends’ opinions contributed

more to individual ethical decision making than a manager (Fraedrich & Lyer, 2008);

d) the psychology industry, due to a lack of clear direction from their code of ethics,

relies on three dimensions of ethical decision making: power, duration, and clarity of

termination (Barnett, Behnke, Rosenthal & Koocher, 2007); e) the hospitality

industry is characterised by the importance of the individual moral intensity (Ng,

White, Lee, & Moneta 2009); f) in the cable news networking and broadcasting

industry, the experience of the employees was important in making ethical decisions

(Boone & Macdonald 2009); g) in the financial industry, circumstances often

outweigh an individual’s good intention (Prentice, 2007), and h) bioscience

companies deal with ethical dilemmas by having different mechanisms based on the

nature of the ethical issues (Mackie, 2004).

Organisational size, like industry type, has been relatively neglected as a focus of

research in ethical decision making. Five out of seven studies have not found

significant correlations between organisational size and ethical decision making, and

the remaining two had mixed findings (O’Fallon & Butterfield, 2005). Chavez,

Wiggins, and Yolas (2001) reported a positive correlation between the company size

and ethical decision making, while Bartels et al. (1998) argued the opposite.

However, Rosen, Hall, and Stainer (2005) suggested that any size organisation can

be ethical as long as they have sustainable ethical policies in place and that they are

committed to them.


The final organisational factor is training. Oddly, it has not been given justice in the

past as either important or influential in ethical decision making; only one study was

recorded according to O’Fallon and Butterfield (2005). In a study carried out by

McKendall, DeMarr, and Jones-Rikkers (2002), ethical training courses were found

to be not significant in relation to ethical decision making, mostly due to the fact that

those courses were developed as part of ethical compliance programs rather than as

more discursive and insightful training experiences in themselves. In support of this

idea, Kavathatzopoulos (2003) argued that for business ethics education programs to

be able to positively contribute to ethical decision making, the critical factors for

acquiring ethical competencies have to be identified well in advance and acted upon.

From the results of three independent samples in Germany and the United States,

Rottig and Heischmidt (2007) argued that ethical training can be a successful tool to

minimise significant differences in approaching ethical decision making based on

cultural differences.

3.3.4 The degree of a factor’s influence on ethical decision making: External Factors

Lastly, there are those factors that belong neither to the individual nor to the

organisation, but which impact on the decision-making process from the outside.

These factors are referred to by researchers as external factors or the general

environment; they are seen as the background conditions in which the organisation

operates (Schermerhorn , 2005; Jirasek, 2003; Peer & Rakich, 1999; Zentner & Gelb,

1991). These external factors can be grouped into six main categories: political and

legal, economic, social and demographic, technological, environmental, and

competition (Schermerhorn, 2005; Jirasek, 2003; Peer & Rakich, 1999; Zentner &

Gelb, 1991).


Political and legal factors can influence ethical decision making in two different

ways: firstly, an individual’s political ideology may consciously or unconsciously

affect them when making a decision; secondly, the political philosophy followed by

the party or parties running the government can influence companies directly, in

terms of public policy, and indirectly through laws and government regulations

(Deshpande, 2009; McGowen, Stephens, & Gruber, 2007; Smith, Simpson & Huang,

2007; Schermerhorn, 2005). Economic factors such as inflation, interest rates,

unemployment, income levels, gross domestic product, and other related indicators

of the economic wealth of a nation can influence the decision maker (Schermerhorn,

2005; Jirasek, 2003; Peer & Rakich, 1999; Zentner & Gelb, 1991). Social and

demographic factors are the social values on issues such as human rights, trends on

education, employment, and morality (Patel & Schefer, 2009; Knapp & Vandecreek,

2007). Demographic factors are important as the different demographic composition

of a particular location may require the provision of different services and products

(Schermerhorn, 2005). Technological factors are based on the development and

availability of new technologies, including scientific advancement (Schermerhorn,

2005). Environmental factors incorporate all of the issues related to the natural

environment, including levels of public concern expressed through environmental

groups.

3.4 Summary of the literature review

In summary, the most salient point to make regarding 48 years of research into

factors influencing ethical decision making is about the quantity of these factors

available in the literature that have been found capable of influencing decision


makers. The fact that there are so many factors that have already being identified as

influential in the literature supports the initial claim of this paper for a taxonomic

framework capable of summarising them. This study acknowledges the great

contribution made by previous research in creating the current knowledge on ethical

decision making, and uses the output of this research as building blocks to achieving

greater outcomes. In order to explain the aim of this paper, an analogy for building a

car will be used. Most of the time, car manufacturers assemble parts that have been

developed and produced by different suppliers to produce the car. In the same way,

the current paper has successfully identified a large number of separate factors

(Table 3.2) that have been previously tested for their influence on ethical decision

making, and introduced them into the proposed taxonomic framework. For example,

some studies have tested the engine (cognitive moral development); some others, the

gear box (ethical training). Using our analogy, these studies are of limited value on

their own, but they can be seen more as a means to further and more complex

analysis, with the final aim being to build a high quality multidimensional framework

(car). The following section presents the taxonomic framework for factors

influencing managerial ethical decision making that has been proposed in this paper.

3.5 A taxonomy of factors influencing ethical decision making

From the review of the current literature it is clear that there is a large of number of

factors that have already been individually analysed and found capable to influence

ethical decision making (O’Fallon & Butterfield, 2005; Loe et al., 2000; Ford &

Richardson, 1994). However, what the current literature is lacking is a coherent

taxonomy that, by summarising all of these factors, can provide a better picture of

the most common influences on managerial ethical decision making in practice. As


the aim of this taxonomy is to combine a large number of factors that have been

tested almost individually as influential in managerial ethical decision making, it is

important to group all of these influencing factors into a number of categories that

can best capture their real nature and can be easily recognised and used in practice.

As previously discussed, the proposed taxonomy has four categories of factors:

ethical, individual, organisational, and external (Figure 3.1). Having now identified

and developed the four categories of influencing factors, the next step is to justify

each of the four components not individually but as part of the proposed taxonomic

framework for managerial ethical decision making.

Figure 3.1 Taxonomy of factors influencing managerial ethical decision making

This figure represents an evidence-based taxonomy of factors influencing ethical

decision making by combining a large number of factors into four categories: ethical,

individual, organisational, and external.


The central circle represents managerial ethical decision making (MEDM) based on

the combination of the four categories of factors. Its colours represent the degree of

influence that these four categories can have on ethical decision making. The circle’s

colour combination can vary based on the degree that the four categories of factors

play on individual managers. For example, the managerial ethical decision making

circle for a manager who is strongly influenced by deontology and ethical training

will be represented by a circle that is dark orange and blue.

The orange triangles represent the four schools of moral philosophy—ethical

factors—which are instrumental to ethical decision making. These four schools can

either individually, or in combination, influence ethical decision making to varying

degrees (graphically represented by convergent triangles that start separately and

converge in the middle).

3.5.1 First dimension the ethical factors

There is a very animated debate in ethics as to whether the focus should be on

matching the demand of particular situation to universal principles or whether the

goal ought to be to find the principles or approach appropriate for a particular


situation; in short, whether one subscribes to an absolutist or a pluralistic viewpoint

(Hinman, 2003; Ferrell et al, 2008). Both sides have strong supporting arguments.

An increased number of papers (six in Loe et al., 2000; 23 in O’Fallon & Butterfield,

2005; and three in the most recent literature) in the current literature on ethical

decision making is based on Kohlberg’s CMD model; for example, Rest (1979) and

Lind (1995). CMD is a theory that divides respondents into different categories (six

stages) based on their individual level of moral development (Kohlberg, 1979).

Typically, however, each respondent can belong to only one particular stage at any

given time, reflecting the absolutistic view. The problem with this absolute approach

to ethics is the underlying assumption that individuals fit perfectly into only one

stage at a time. In reality, it seems more plausible that individuals could belong to

different stages in different situations, or that even in the same situation their actions

could be the result of a combination of different stages used conjointly. In order to

reduce the likelihood of preconceived bias towards an absolutist approach, the

proposed framework of managerial ethical decision making has been developed in

such a way that it is flexible enough to capture a continuum of responses from

absolutism to pluralism.

In the framework (Figure 3.1), it is possible to see that the four schools of moral

philosophy are separated at the beginning, giving the opportunity to be chosen

individually (absolutism); they can also converge into the centre, giving the

opportunity to be chosen in combination with others (pluralism). Thus, if a manager

strongly belonged to only one school of moral philosophy, then they would mostly

adopt all of the principles and criteria from that particular approach in reaching an

ethical decision. On the other hand, if a manager used a more pluralistic approach to


ethics, then they would reach an ethical decision by using a mix of principles from

two or more schools of moral philosophy.

3.5.2 Second dimension: the individual factors

In relation to individual factors, an individual manager would be influenced, more or

less, by every factor included in this group; however, not every factor would

necessarily impact on the manager to the same degree. Therefore, providing a range

of choices to represent the factors in this group is vital. For that reason, the most

common individual influencing factors identified in the literature (O’Fallon &

Butterfield, 2005; Loe et al., 2000; Ford & Richardson, 1994), such as Kohlberg’s

CMD, age, gender, education, professional experience, ethical training, personal

values, and nationality, should be incorporated in the framework. What would

happen in practice at this level when a manager would be put in a situation of making

a decision? In answering this question it is important to divide the individual factors


into two main categories based on the nature of these factors: first the ones that are

from birth and the ones that are related to human development and interactions with

others. Initially, those individual factors related to birth (age, gender, and nationality)

would start to shape the EDM process, which would then be further shaped by those

individual factors related to human development and interactions with others

(religion, cognitive moral development, professional experience, ethical training and

training in general).

3.5.3 Third dimension: the organisational factors

As previously argued, a number of organisational factors can influence ethical

decision making in different ways (O’Fallon & Butterfield, 2005; Loe et al., 2000;

Ford & Richardson, 1994). Organisational culture, for example, influence decision

maker’s judgment by pushing particular values that have been formally or informally

shared within a particular organisation (Ampofo 2005). However, these

organisational values might also conflict with the ones that the individual would

usually hold and act upon outside of the organisation. For example, in researching

the problems emerging from the Bundaberg Hospital Commission of Inquiry, Casali


and Day (2010) found that both the values of the staff and the espoused values of the

organisation were similar and positive, whereas the values promoted by the

organisational culture in practice comprised bullying, fear, tokenistic consultation,

and power control (Casali & Day, 2010). As a consequence of this powerful

influence that organisational factors can have on managerial ethical decision making,

the main organisational factors have been identified and incorporated into the

managerial ethical decision making model. Once again, in order to reflect the real

preferences of the managers as much as possible, all of those factors have been

converted into independent items.

3.5.4 Fourth dimension: the external factors

In the same way, external factors, even though they do not influence ethical decision

making directly, play an indirect but important role in shaping ethical decision

making. For example, in the public health care sector, political factors such as

strategic direction can have a great deal of influence when making a decision. More

particularly, budget allocation in Australia is driven by government policy. Hospitals

will have more or less to play with depending on Treasury allocations. In addition to


this, it has been found that physicians and hospital employees with political

connections were significantly less ethical than other employees (Deshpand, 2009).

The social factor is another important external factor, which, by setting societal

standards, puts pressure on the overall performance of a business (Hagan & Moon,

2001). Competition can also put strong pressure on ethical decision making as the

increase of global competition has also increased the complexity of making

organisations commercially successful (Stainer, 2004). Similar to the other factors,

the main external factors have been converted into individual items, and tested

independently.

3.6 Conclusion

This paper has offered an evidence-based taxonomy based on more than 40 years of

research into factors influences ethical decision making. From the review of the

literature, 26 influencing factors (Table 3.2) have being identified and summarised

into four categories: ethical factors, individual factors, organisational factors, and

external factors (Figure 3.1). Each of the four categories of factors influencing

ethical decision making can influence managers. The main contribution of such an

evidence-based taxonomy is that it sets the foundation for further research on the

multidimensional aspects of ethical decision making and, more importantly, on what

really influences managers at work. This taxonomy not only collects a large number

of factors influencing ethical decision making, and allocates them into four mutually

exclusive and unambiguous categories that include all possible factors influencing

ethical decision making, but also describes the way in which these four categories

influence ethical decision making.


This study has its limitations—relying on secondary data being collected by three

reviews covering only certain academic journals, which may have resulted in other

influential factors being omitted from this framework. Also, another possible

limitation of this evidence-based taxonomy is that it provides a way to classify

factors influencing ethical decision making but it does not attempt to measure actual

behaviour. Nevertheless, the proposed evidence-based taxonomy provides a valuable

basis for the development of a multidimensional tool to assess factors influencing

ethical decision making. It allows researchers to create a more practical

multidimensional research tool to understand the weighting of importance that all of

these factors play on decision makers. In conclusion, the proposed taxonomy will

provide managers with a full view of what can influence them when they make

decisions, and eventually help them to make a more sound ethical choices, not only

because they are more aware of the possible influencing factors but also because they

can assess themselves against their personal attitude toward these factors.

Part 2 Pilot study

Developing and validating the Managerial Ethical Profile (MEP) scale, and

investigating the possible profiles arising from the newly developed scale.

Introduction

Part 1 highlighted the research problem as a lack of understanding about factors

influencing managerial ethical decision making in the health care industry (Chapter

2), and developed a taxonomy of influencing factors for managerial ethical decision

making (Chapter 3).


Part 2—Chapters 4 and 5—is more exploratory in nature. Chapter 4 reports on the

initial validation of the discriminant capacity of the MEP scale by using a pilot study

comprising two very different, purpose-selected samples—academics and students

(n=41), and small-business managers (n=41). The purpose of Chapter 5 is to explore

clusters across the pilot study data and to categorise them as MEPs.

Chapter 4 aims to empirically test the initial validity of the MEP scale, especially

the ethical sub-scales (also referred to as criteria), by using the MEP scale on the two

samples. Significant differences were found between the two cohorts, suggesting that

the scale is working. Chapter 4 prompts the question: Can the MEP sub-scale be used

to profile individuals?

Chapter 5 analyses the results of using MEP sub-scales to profile individuals.

Hierarchical cluster analysis (HCA) was used, providing five significantly different

MEPs. Chapter 5 prompts the question: Can the other influencing factors further

describe these five managerial ethical profiles?


The MEP subscales

Sub-scale number Name Code

Sub-scale 1 Economic Egoism SS1

Sub-scale 2 Reputational Egoism SS2

Sub-scale 3 Act Utilitarian SS3

Sub-scale 4 Rule Utilitarian SS4

Sub-scale 5 Self Virtue SS5

Sub-scale 6 Others Virtue SS6

Sub-scale 7 Act Deontology SS7

Sub-scale 8 Rule Deontology SS8

Preamble

Part 2 presents the initial development and validation of the MEP scale, which will

be further discussed in Part 3, by using the results from the main study (n= 441

usable questionnaires) (Appendix 1). Developing a new scale is a long and complex

process, which requires years of research and adjustments, and some time redefining

individual items and entire sub-scales. Although Chapter 6, will present the full

discussion about the development of the MEP scale, Part 2 provides a short

discussion as it is based on the results from the pilot study, which applied the MEP

scale to two samples. The MEP scale has been designed in a deductive way, and

therefore each item has been developed to be exclusively part of one of the eight

ethical sub-scales rather than developing a pool of items and subsequently

discovering factors by using exploratory factor analysis (DeVellis, 2003). Despite a

full discussion on items development included in Chapter 6, it is necessary to


mention that all of the items have been developed in accordance with the current

literature and that content validity was achieved by interviewing 14 experts in the

field of ethics, philosophy, and religion. Once the items and appropriate sub-scales

were developed, the next step was to see the MEP scale in action and therefore the

need for a pilot study emerged. The first pilot study was performed on academics and

students (n=41) based on the fact that academics and students, while apparently

different, share a number of similarities, especially in terms of their ability to

critically evaluate information and knowledge. In contrast, the second sample—

small-business managers—was chosen to be significantly different from the first as it

relied on experiences rather than formal education.

In order to initially measure the psychometric capabilities, or what is also called the

internal consistency of the MEP scale, Cronbach’s Alpha test was performed on each

of the eight ethical sub-scales (Table 3.3).

Table 3.3 Results of Cronbach Alpha analysis

Sub-scale Alpha Sub-scale Alpha

SS1–Economic egoism 0.799 SS5–Self virtue 0.843

SS2–Reputational egoism 0.691 SS6–Others virtue 0.723

SS3–Act utilitarian 0.876 SS7–Act deontology 0.463

SS4–Rule utilitarian 0.663 SS8–Rule deontology 0.780

As a rule of thumb, every sub-scale around .7 is seen as moderately reliable

(DeVellis, 2003). There are five out of the eight sub-scales that would fit into this

category: SS1–Economic egoism, SS2–Reputational egoism, SS4–Rule utilitarian,

SS6–Others virtue, and SS8–Rule deontology. There are two sub-scales that have


performed better (SS5–Self virtue: 0.843 and SS3–Act utilitarian: 0.876), and only

one that has not performed as well (Act deontology 0.463). Despite the fact that act

deontology sub-scale has not yielded a good result of internal consistency, it was

decided to keep it as it is and to move to the next stage (larger sample). This decision

was based on two reasons:

1. When using exploratory factor analysis with the six items representing

Deontology, the items have split into the two expected sub-scales (Act

deontology and Rule deontology).

2. The experts’ opinions were strong in supporting the appropriateness

of maintaining two sub-scales for Deontology (act and rule).

The importance of Part 2 is to initially test the newly developed MEP scale with two

pilot studies for two main reasons:

1. To initially test the psychometric capability of the MEP scale in

discriminating between different respondents. This aim, achieved in

Chapter 4 by using the MEP scale on two a priori different cohorts

(academics and students, and small business managers), has identified

significant differences in their responses, suggesting that the MEP scale

has the capacity to discriminate and that it can therefore be used as an

instrument to classify respondents into groups.

2. To look at the preliminary results of a cluster analysis based on the MEP

scale results and possible clusters (profiles). Chapter 5 reports the

findings of HCA (methodology adapted due to the small sample size,

n=41) performed on the results from the two pilot studies.


Chapter 4

A quest for ethical decision making: Searching

for the holy grail and finding the sacred trinity

in ethical decision making by managers

4.1 Abstract

The study aim was to initially identify what ethical frameworks managers use when

making decisions and whether they differ from those used by the wider community.

A questionnaire was distributed to a number of small business managers, university

academics, and university students. Results show that that there are some statistically

significant differences between the ethical decision-making profile of business and

non-business decision makers; however, somewhat surprisingly, concern for the

bottom line is not seen by small-business managers as the most important criterion in

managerial decision making to the exclusion of other more ethical criteria.

4.2 Introduction

In recent years, the public’s attention has been captured by reports of organisational

actions leading to catastrophic consequences for stakeholders. The bankruptcies of

Enron Corp. and Tyco International Ltd.—which stripped thousands of people of

their jobs, pension funds, and dignity—are only two of many recent examples where

the actions of managers have been viewed as patently wrong or unethical by society,

but right and justifiable by the perpetrators. When interviewed, many of those

accused of wrongdoing have passionately argued that they have always acted in the


best interests of their shareholders, making decisions that maximised profits in order

to fulfil their duty of care as managers (Sims & Brinkmann, 2003). In practice, then,

definitions of what constitutes ethical or unethical decisions are contested, changing

dramatically with the points of view of the various stakeholders (Johnson, 2007;

Sims & Brinkmann, 2003). One possible step towards preventing such future

corporate disasters would be to be able to anticipate and clarify these divergent

points of view within an organisation, assessing which will further organisational

goals and which might undermine those goals. As a step in the direction of

developing a potential tool to accomplish this task, this paper attempts to answer the

question: what ethical frameworks do managers use in making decisions?

It is well established that a number of different ethical frameworks may be applied

when making decisions, each used either in its own right or combined in a pluralistic

approach (Hinman, 2003). Almost all business and management ethics textbooks, for

example, begin with a chapter explaining the different ethical frameworks that aim to

provide a definition of what constitutes a right action. Collectively, these have been

variously described as ethical reasoning (Grace & Cohen, 1995); moral philosophies

(Ferrell, Fraedrich, & Ferrell, 2006); welfare, rights, and justice (Boatright, 2007);

ethical and economic theoretical grounding (Collins-Chobanian, 2004), and ethical

theories (Fisher & Lovell, 2003). What has not been as well established is how and to

what extent managers draw on these ethical frameworks in the daily fulfilment of

their managerial duties, and whether doing so contributes either to unity of

organisational purpose or congruence with community standards.


Part of the problem may be due to what appears to be a divergence between the

normative models of decision making and everyday practices. In business and

management training literature, there are many models of decision-making processes

available; however, they do share some common assumptions. For example, Guy

(1990), in her assessment of ethical decision making in everyday work situations,

observed that ‘in the Western world, we applaud rationality’ (p. 28). Typically, a

rational decision is ‘one that occurs in ordered steps and maximises a value, whether

it is honesty, efficiency, reliability, controllability, marketability, or any of many

values’ (p. 28). In practice, these values may clash, but a step-by-step approach

allows the rational decision maker to revisit an issue until the relevant values are

maximised. Many issues are also multidimensional, requiring several iterations of the

steps in the decision-making process. Guy warns, however, that these ideal models

make many assumptions. They assume, for example, consistency in values and

tastes, and the availability of time and energy to thoroughly investigate problems,

both of which are not always present in real-world applications. Drawing on the

work of Nobel Prize winner, Herbert Simon, she suggests ‘the evidence is

overwhelming that the theoretical model of rational decision making does not reflect

actual decision making process’ (p. 31).

Given that decision making in practice diverges from the ideal type, will

commitment to ethical frameworks restore organisational unity of purpose? It has

become common to refer to ethics as a sine qua non of business. Nonetheless, the

introduction of ethics into an organisation, if not well managed and well understood,

could in fact aggravate current organisational problems (Johnson, 2007). This could

happen, for example, when different individuals in the same organisation judge the


ethics of an action or situation by using radically different ethical frameworks,

effectively increasing the level of conflict between staff. The issue is not whether

managers take different approaches to ethical issues, but whether these different

approaches, and their impact on decision-making processes, are clearly understood

within the organisation. Arguably, the ability to outline the ethical frameworks drawn

on by individual managers as criteria for their ethical decision making could be an

important step towards achieving transparency and accountability within

organisations. It could bring more predictability into an organisation’s ethical

performance without detracting from diversity.

In management, as in other professions, discussions of the ethical frameworks

underpinning decisions have focused primarily on three major approaches: the ethics

of consequences (ethical egoism and utilitarianism), duties (Kantianism and

principlism), and character (virtue). In recent times, additional interest has been

directed to more contextual and relationship-based accounts of ethics, derived mainly

from feminist ethics (ethics of care and applied ethics). It is clear that these newer

frameworks require a different approach to decision making than the traditional

ethical frameworks, which Walker (1998) characterised as ‘theoretical-juridical’.

They are concerned with deductively applying codifiable sets of moral formulas in

ways that provide universal answers to particular problems. Walker identifies the

newer frameworks as ‘expressive-collaborative’: seeing moral life as a continuing

negotiation among people, determined not only by seeking shared moral values, but

also by developing and sustaining committed relationships. Like many proponents of

virtue ethics, those taking an ethics-of-care approach often downplay the role of

universal principles in decision making, instead drawing attention to the capacity of


persons to express compassion, care, or kindness as ethically important. One

approach often taken, and one accepted in the present study, is to include the ethics-

of-care approach within virtue ethics (Halwani, 2003). An ethics-of-care approach

also gives more prominence to the role of emotions in ethics (Halwani, 2003).

Perhaps understandably, then, for this reason, it has to this point in time had less

influence on managerial ethics, which, as noted, remains committed to ideals of

rational decision making.

Can the influence of these major ethical frameworks be detected at all in the decision

making of managers? To answer this question, a questionnaire was distributed to a

group of small business managers and compared with results obtained from a group

of university academics and students.

4.3 The study

The number of studies on ethical decision making has dramatically increased in the

past 40 years, with at least three major studies reviewing the literature on ethical

decision making from 1972 to 2003. Interestingly, the three studies came to a

common conclusion (Ford & Richardson, 1994; Loe et al., 2000; O'Fallon &

Butterfield, 2005). The latest paper, written by O’Fallon and Butterfield (2005),

reviewed the empirical literature on ethical decision making—from the most

prominent academic journals—between 1996 and 2003, and concluded that 174

studies had been carried out on this important topic during that period, many more

than in previous years. What is interesting is that none of these studies were able to

conclude that they had found the ‘Holy Grail’ of ethical decision making; they all

concluded that there is a need for further research to be done in this area. This would


seem to confirm that, in practice, there is not one universal definition of what is right

(the Holy Grail), but rather a few major ethical frameworks. In particular, there are

three major views of ethical decision making, which might be referred to as the

‘sacred trinity’: an ethic of consequences, an ethic of duty, and an ethic of virtue. In

the business ethics literature, these are also sometimes referred to as the three

constituent elements of ethical decision making: outcomes/consequences,

process/duty, and the individual/decision-maker character (Ferrell et al., 2005;

Hosmer, 2006). Do managers of small businesses use these ethical frameworks when

making decisions, or are they more likely to give prominence to economic, rather

than ethical, considerations in comparison to a section of the non-business

population?

4.4 Hypotheses

To answer this question, the pilot study will test two main hypotheses; first—

Hypothesis 1 (H1)— business managers are more drawn to ethical frameworks that

prioritise economic goals and, second—Hypothesis 2 (H2)— the ethical criteria they

use differ from the non-business population.

In the absence of any similar previous studies that would have investigated

managerial ethical decision making as an independent variable and the

operationalised principles from the schools of moral philosophy as the dependent

variables, the general conviction that, in business, the most important factor is the

pursuit of the bottom line (profit) has been adopted and implemented in the first

hypothesis. This idea was published by Friedman (1970) in the New York Times:


In a free-enterprise, private-property system, a corporate executive is an

employee of the owners of the business. He has direct responsibility to his

employers. That responsibility is to conduct the business in accordance with

their desires, which generally will be to make as much money as possible while

conforming to the basic rules of the society, both those embodied in law and

those embodied in ethical custom. Of course, in some cases his employers may

have a different objective. (p. 1)

In addition to Friedman’s statement, a Dallas Times Herald survey showed that 75%

of respondents believed that business people would bend the rules for success

(Axline, 1990), and a survey on excellence in journalism has shown that,

increasingly, concerns have been raised in relation to the trade of pressuring for the

bottom line against good coverage of the facts (Kohut, 2004).

It would be expected, then, that both the criteria belonging to egoism—SS1

economic egoism, in particular, and SS2 reputational egoism—would score higher

than any other criteria by the small-business managers.

4.4.1 Hypothesis one (H1)

Managers prefer an outcome-based ethical framework because it is the one

dimension that deals directly with economical return and self advantage.

To put the ethical decision making of business managers further into context, it is

important to ascertain whether there are significant differences between respondent’s

ethical preferences based on individual factors, including their profession. Over the

past 20 years, many studies have been conducted on the degree of impact that


different factors would have on ethical decision making. Professional experience and

industry type have been tested in different studies, producing mixed results (O'Fallon

& Butterfield, 2005). Nevertheless, although the results of research in this area are

ambiguous and sometimes contradictory, it is clear that there are some significant

differences in relation to ethical decision making based on profession. For example,

Sparks and Hunt (1998), found that professionals are more ethically sensitive than

students; while, on the other hand, Cohen, Pant, and Sharp (2001), did not discover

any significant differences between students and professionals.

In this study, responses from the small-business managers will be compared to

academics and students in relation to their performance against the eight ethical

criteria, in order to test the following hypothesis.

4.4.2 Hypothesis two (H2)

The ethical criteria that are of highest importance to managers of small- to medium-

sized businesses will differ from those of academics and students.

4.5 Measure

The data used for this research was taken from the developmental stage of a larger

project that profiles the influence of ethical frameworks and other external factors on

the decision making of individual managers. To test the hypotheses for the present

study, a questionnaire consisting of 24 items was used (Appendix 1). To cover the

three ethical approaches, discussed in section 4.3—outcomes/consequences,

process/duty, and the individual/decision-maker character—six items (statements)

were developed for ethical egoism, utilitarianism, deontology and virtue ethics.

Ethical egoism and utilitarianism constitute the two major forms of consequentialist


theory. Ethical egoism is the view that, when considering outcomes, people ought to

act out of self interest. If everyone acts in this way, it is argued, interests will

ultimately balance out. Utilitarians, on the other hand, seek to make decisions that

create the greatest good for the greatest number—good being defined in a variety of

ways from maximising pleasure and minimising pain, through to maximising

interests (Marshall, 2005). Within utilitarianism, there is also a distinction between

‘act utilitarianism’, wherein one seeks to judge the greatest good with respect to each

act, and ‘rule utilitarianism’, which seeks to follow rules that maximise the greatest

good for the greatest number (Hollingsworth, Hall, & Trinkaus, 1991). Deontology

or duty-based ethics does not make the consideration of consequences the primary

determinant of ethical deliberation (Micewski & Troy, 2007). Instead, deontologists

argue that there are certain duties incumbent on us all. Similar to utilitarianism,

deontology has two main interpretations of what is right or wrong based on either the

moral rules or on the nature of the act itself. According to ‘rule deontology’, a

decision is ethical as long as it has conformed to general moral principles, such as the

Kant’s categorical imperative: ‘Act as if the maxim of thy action were to become by

thy will a universal law of nature’ (as cited in Ferrell et al., 2005, p. 101) or the

golden rule: ‘do unto others as you would have them do unto you’ (as cited in Ferrell

et al., 2005, p. 101). Act deontology, instead of using predefined principles, promotes

the use of equity, fairness, and impartiality in making a decision applied to particular

acts. As distinct from the first two major approaches, which focus on acts and rules,

virtue ethics focuses on character. Virtue ethics gives more consideration to the

impact of choices on character and relationships (Van Hooft, 2005).


Content and construct validity have been tested in relation to the statements

representing these different dimensions of ethical decision making. Content validity

was tested by converting the main ideas of the different schools of moral philosophy,

as exemplified in the current literature, into more operational statements. In relation

to content validity, 14 experts in the field of ethics, philosophy, and theology from

Universities in South-East Queensland (Australia) were interviewed using semi-

structured interviews (De Vaus, 2002). Each statement was shown to the experts, and

they were asked to comment on the extent to which each of statements was

representative of the respective schools of moral philosophy. Most of the respondents

agreed on the representativeness of the consequence-based statements in relation to

egoism and utilitarianism. With respect to the statements about duty-based ethics,

there was general feedback that the six initial statements developed were too specific

(freedom of conscience, freedom of consent, freedom of speech, and due process),

and they did not adequately reflect general aspects of that particular ethical

framework such as the Golden Rule. Also, due to the fact that it is not as widely used

as the previous ethical frameworks, there was less agreement about the statements

reflecting the virtue-based approach. Some experts agreed that the statements were

quite representative of virtue ethics, while some others, with perhaps more expertise

in this particular area of moral philosophy, raised some concerns about the fact that

virtues are characteristics that are embedded in the character of decision makers and

not simply in what they do. For example the statement: ‘I make sure that honesty is

paramount in my decision making process’, was changed to ‘I am an honest person

and therefore I make only honest choices’. The statements were modified and

implemented in the final version of the questionnaire (Appendix 1), based on the

variety of concerns expressed by the experts interviewed.


4.6 Sample

As mentioned in section 4.5, the data used for this study was preliminary data that is

part of a larger study aimed at developing profiles of managers’ ethical decision

making (Appendix 1 -The MEP questionnaire). Initially, 82 people responded to the

questionnaire. The questionnaire was administered to two different samples—

academics and students (n=41) and small-business managers (n=41) on two

occasions.

From the first sample (academics and students), 18 academics were selected from

different faculties and universities and asked to answer the questionnaire. Sixty

second-year nursing students were asked to fill in the questionnaire, 23 of whom

returned it: a 38% response rate. On the other hand, a group of 79 small-business

managers who attended a monthly business breakfast organised by a regional

Business Centre Enterprise (not-for-profit organisation) were asked to fill in the MEP

questionnaire. Forty-three questionnaires were returned; however, only 41 were

completed in full: a 52% response rate.

4.7 Results empirical analysis

To test the two hypotheses, and to examine in more detail the relationship between

the variables of the eight ethical sub-scales, an analysis of variance (ANOVA) was

performed. Estimated marginal means were performed by using the computed results

of the eight ethical sub-scales (see Table 4.1) and compared based on the two groups

of respondents (small- and medium-sized-business managers, and academics and

students). Graphical representation of results of the estimated marginal means is

presented below (see Graph 4.1). The graph shows the mean results based on the 5-


likart scale (Y axis) of the two cohorts of respondents in relation to the different

ethical criteria (X axis).

Looking first at the graph, with respect to Hypothesis 1 (managers prefer an

outcome-based ethical framework because it is the one dimension that deals directly

with economic return and self advantage), it is clear that ethical sub-scales SS1, SS2,

and SS3 have been scored lower than the other five sub-scales by the small-business

managers. As previously discussed, sub-scale SS1 is focused on economical return,

sub-scale SS2 on organisational reputation, and sub-scale SS3 on act utilitarian. Even

though, graphically, it might look as though those three sub-scales are considerably

less important than the others, in reality they are not.

Table 4.1 Mean differences between small-business managers, and academics and student in relation to the eight ethical sub-scales

Source developed for this study by using SPSS version 15

Looking at the mathematical results behind this graph (see Table 4.1), it is possible

to see that these three sub-scales have mean scores just below 2— which in the MEP

scale is ‘very important’—and the other five factors are just below 1.5, ranking them

closer to 1—‘extremely important’. Nevertheless, in relation to the H1, economic

return is clearly not the most important factor in managerial decision making and, in


fact, it has been the lowest mean over the eight sub-scales for both samples (see

Table 4.2).

In conclusion, it is suggested that small-business managers did consider the bottom

line to be the most important factor in their decision-making processes, a finding that

disproves H1. This result could suggest that managers, when assessing different

options, would not seek the highest economical return without considering other

ethical criteria, derived from their personal values or common ethical frameworks.

Graph 4.1 Estimated marginal means

Turning to Hypothesis 2—that the ethical criteria that are of highest importance to

managers of small- to medium-sized businesses will differ from those of academics

and students—Graph 4.2 indicates that there were statistically significant differences

between the two samples in relation to the perceived importance of each of the eight

ethical criteria to the respondent’s decision making-process. The data confirms that

the non-business sample shows relatively little concern for economic factors in

ethical decision making compared to those involved in business. However, it is also


clear that the small-business managers’ concern for the bottom line is not to the

exclusion of other ethical criteria.

These differences are further confirmed by the results in Table 4.2, which were

generated using ANOVA (repeated measure of variance) and tested at 95% of

significance level; therefore, only the results with .05 and below are significant (see

results with the * symbols in Table 4.2).


Table 4.2 Estimated marginal means for ethical decision making

Group (I) ethics

(J) ethics

Mean difference (I-J)

Std. error

Sig. (a)

Group (I) ethics

(J) ethics

Mean difference (I-J)

Std. error

Sig. (a)

1.00 students and academics

SS1 Ethical Egoism

SS 2 .402 (*) .092

.001 2.00 small business managers

SS1 Ethical Egoism

SS 2 .079 .092

1.000

SS 3 .431 (*) .131

.041 SS 3 .043 .131

1.000

SS 4 .756 (*) .122

.000 SS 4 .474 (*) .122

.006

SS 5 .549 .175

.066 SS 5 .421 .175

.410

SS 6 .726 (*) .140

.000 SS 6 .494 (*) .140

.020

SS 7 .854 (*) .140

.000 SS 7 .360 .140

.289

SS 8 .866 (*) .139

.000 SS 8 .482 .139

.023

SS 2 Reputat- ional Egoism

SS 1 -.402 (*) .092

.001 SS 2 Reputat- ional Egoism

SS 1 -.079 .092

1.000

SS 3 .028 .108

1.000

SS 3 -.037 .108

1.000

SS 4 .354 (*) .109

.046 SS 4 .394 (*) .109

.014

SS 5 .146 .146

1.000

SS 5 .341 .146

.460

SS 6 .323 .115

.157 SS 6 .415 (*) .115

.014

SS 7 .451 .118

.007 SS 7 .280 .118

.424

SS 8 .463 (*) .120

.006 SS 8 .402 (*) .120

.034

SS 3 Act Utilitarianism

SS 1 -.431 (*) .131

.041 SS 3 Act Utilitarianism

SS 1 -.043 .131

1..000

SS 2 -.028 .108

1.000

SS 2 .037 .108

1.000

SS 4 .325 .103

.063 SS 4 .431 (*) .103

.002

SS 5 .118 .127

1.000

SS 5 .378 .127

.099

SS 6 .295 .100

.112 SS 6 .451 (*) .100

.001

SS 7 .423 (*) .094

.001 SS 7 .317 (*) .094

.033

SS 8 .435 (*) .110

.005 SS 8 .439 (*) .110

.004

SS 4 Rule Utilitarian-ism

SS 1 -.756 (*) .122

.000 SS 4 Rule Utilitarianism

SS 1 -.474 (*) .122

.006

SS 2 -.354 (*) .109

.046 SS 2 -.394 (*) .109

.014

SS 3 -.325 .103

.063 SS 3 -.431 (*) .103

.002

SS 5 -.207 .159

.998 SS 5 -.053 .159

1.000

SS 6 -.030 .100

1.000

SS 6 .020 .100

1.000

SS 7 .098 .104

1.000

SS 7 -.114 .104

1.000

SS 8 .110 .116

1.000

SS 8 .008 .116

1.000

SS 5 Virtue of Self

SS 1 -.549 .175

.066 SS 5 Virtue of Self

SS 1 -.421 .175

.410

SS 2 -.146 .146

1.000

SS 2 -.341 1.46

.460

SS 3 -.118 .127

1.000

SS 3 -.378 .127

.099

SS 4 .207 .159

.998 SS 4 .053 .159

1.000

SS 6 .177 .11 .969 SS 6 .073 .11 1.00


1 1 0 SS 7 .305 .11

8 .281 SS 7 -.061 .11

8 1.000

SS 8 .317 .120

.247 SS 8 .061 .120

1.000

SS 6 Virtue of Others

SS 1 -.726 (*) .140

.000 SS 6 Virtue of Others

SS 1 -.494 (*) .140

.020

SS 2 -.323 .115

.157 SS 2 -.415 (*) .115

.014

SS 3 -.295 .100

.112 SS 3 -.451 (*) .100

.001

SS 4 .030 .100

1.000

SS 4 -.020 .100

1.000

SS 5 -.177 .111

.969 SS 5 -.073 .111

1.000

SS 7 .128 .079

.962 SS 7 -.134 .079

.939

SS 8 .140 .098

.991 SS 8 -.012 .098

1.000

SS 7 Act Deontology

SS 1 -.854 (*) .140

.000 SS 7 Act Deontology

SS 1 -.360 .140

.289

SS 2 -.451 (*) .118

.007 SS 2 -.280 .118

.424

SS 3 -.423 (*) .094

.001 SS 3 -.317 (*) .094

.033

SS 4 -.098 .104

1.000

SS 4 .114 .104

1.000

SS 5 -.305 .118

.281 SS 5 .061 .118

1.000

SS 6 -.128 .079

.962 SS 6 .134 .079

.939

SS 8 .012 .093

1.000

SS 8 .122 .093

.998

SS 8 Rule Deontology

SS 1 -.866 (*) .139

.000 SS 8 Rule Deontology

SS 1 -.482 (*) .139

.023

SS 2 -.463 (*) .120

.006 SS 2 -.402 (*) .120

.034

SS 3 -.435 (*) .110

.005 SS 3 -.439 (*) .110

.004

SS 4 -.110 .116

1.000

SS 4 -.008 .116

1.000

SS 5 -.317 .120

.247 SS 5 -.061 .120

1.000

SS 6 -.140 .098

.991 SS 6 .012 .98 1.000

SS 7 -.012 .093

1.000

SS 7 -.122 .093

.998

Source: based on the results from the small-business managers and academics and students

Each cell in Table 4.2 describes the extent to which responses by the respective

samples to each individual criteria (I ethics) were significantly different (Sig. a) to

the other ethical criteria (J Ethics) surveyed. Confirming H2, the top cells for each

sample reveal that there was a statistically significant difference in their views of the

first ethical criteria, which reflects concerns for economic factors. Academics and

students have rated ethical criteria 1 (SS1 economic egoism) significantly lower than


almost every other criteria except character (SS5 self virtue) (see Table 4.2). On the

other hand, small-business managers rated the same criteria equally with SS2

(reputational egoism) and SS3 (act utilitarianism) and not significantly different from

SS5 (self virtue) and SS8 (rule deontology). The second difference lies in the level of

importance that the two samples have given to the eight ethical sub-scales (see Table

4.1). Even though both samples rated SS1 the lowest of all, small-business managers

still rated it as very important, while academics and students rated it as important.

Conversely, academics and students gave a higher rating to SS8 (rule deontology)

than small-business manager.

4.8 Conclusion

In conclusion, this chapter argues that, according to the literature, people use

different ethical criteria in their decision-making process, not exclusively from only

one school of moral philosophy (Holy Grail) but from the different dimensions of

ethical decision making (sacred trinity). There were some statistically significant

differences in terms of the degree of importance given to eight ethical criteria derived

from the three major ethical frameworks between two cohorts of respondents

(academics and students, and small-business managers). One interpretation of the

results could be that academics and students consider economic factors (SS1

economic egoism) only after first applying all of the other ethical criteria; that is,

principles of justice and individual rights should always come first, regardless of the

economic cost. On the other hand, it could be argued, on the basis of these results,

that small-business managers tend to first trust their own acquired sense of virtue;

that is, their gut feelings and taste for good business and character, based on good


habits acquired through practical experience. What is also interesting, from the point

of view of this study, is the compatibility of the results, from both the academics and

students and from the small-business managers, with the first three dimensions of so-

called corporate social responsibility. (It has been argued that organisations have four

responsibilities: economic, legal, ethical, and philanthropic (Carroll, 1991; Ferrell,

Fraedrich & Ferrell, 2005). Both cohorts have emphasised that economic returns are

important, as long as they are consistent with one’s own sense of virtue and are

reached while respecting other people’s rights.

Though this study has been limited in scope, and the statistical results are based on a

relatively small number of cases (n=82), the results have nevertheless shown

statistically significant differences in the way in which small-business managers

draw on ethical criteria for making decisions as compared to a non-business cohort.

Although the present study compared only small-business managers to academics

and students, and no individuals from a larger corporation were included in the study,

from these early indications, it is clear that reliable scales may be further developed

to obtain data on the ethical frameworks used by managers in a wider variety of

settings, including larger corporations. There have also been different studies that

have concluded that entrepreneurs or small-business managers are more value driven

than people working for larger corporations (Robinson, Davidsson, Van Der Mescht,

& Court, 2007). Using the scales developed in this study, it will be possible to extend

research into these promising areas.


Chapter 5 Creating managerial ethical profiles:

An exploratory cluster analysis

5.1 Abstract

This study profiles managers according to the ethical criteria that they bring to their

managerial decision making. Profiling was based on exploratory cluster analysis of

the responses of two cohorts: academics and students, and small-business managers,

to a multidimensional questionnaire. The data was collected through a self-reporting

survey (n=82) administered to the two cohorts. An agglomerative HCA was then

performed separately on the two groups’ results based on the eight ethical sub-scales

from the MEP scale. From the given data, groups were clustered using two methods:

between-groups linkage and squared binary Euclidean distance measures. For the

two cohorts, the optimal number of clusters for the given data set was determined to

be five for one and four for the other. Four clusters were common to both cohorts.

The study concludes that a cluster analysis is a useful method for finding the natural

grouping of not well understood influences of ethical principles in decision making,

and their representativeness of common practice.

5.2 Introduction

With the aim of being able to predict future behaviour, researchers and practitioners

have sought to classify people according to their particular personality traits since

almost the beginning of behavioural science. Profiling is a process of grouping

observed physical, social, or psychological differences in individuals into a series of


types, the behaviour of which will be more or less predictable (Dictionary.com,

2010). One of the first recorded attempts at profiling was by the Greek doctor

Hippocrates (c. 460–370 BCE), who developed four profiles based on four factors,

which he called ‘humours’ (fluids). The four humours were blood, yellow bile, black

bile, and phlegm (Kretschmer, 1925). Hippocrates argued that a person is healthy

when the four humours are in balance and that all diseases and disabilities are the

result of having either too much or too little of one or more of these humours.

Figure 5.1 The four temperaments: phlegmaticus, cholericus, sanguineus, melancholicus

Source: Lavater, (1775)


According to Hippocrates, four profiles or temperaments were linked to the four

humours: sanguine, choleric, melancholic, and phlegmatic (Kretschmer, 1925). A

sanguine profile referred to a person with the temperament of blood, which was

usually associated with optimism, cheerfulness, confidence, popularity, and being

fun-loving. A choleric profile was associated with the yellow bile; the people in that

group were usually leaders, had high ambitions, were very energetic, and could

dominate people of other temperaments, especially phlegmatic types. A melancholic

profile, which was directly related to the black bile, was associated with kindness and

perfectionism. Last, the phlegmatic profile was related to phlegm. People in this

profile were viewed as self-content, kind, and shy.

This age-old urge to profile has not gone away. Donald Trump (2004), for example,

includes comments on the importance of understanding psychological traits in

making deals in his ‘how to get rich’ strategies. He argues that understanding the

psychology of people involved in his deals has contributed to his success as a

dealmaker (Trump, 2004). Another example on the importance of psychological

profiling in business is the notion that the potential degree of success in a particular

role can be linked to the possession of particular personality traits; for example,

extroverted, introverted, intuitive, emotive, rational, and judgmental. Thus, Briggs-

Myers et al. (1998) developed a tool to psychologically profile people according to a

number of personality traits. Another widely used profiling tool is the Defining Issue

Test (DIT) developed by Rest (1979; 1990), which is based on Kohlberg’s Cognitive

Moral Development theory (Kohlberg, 1969). This tool presents respondents with

different scenarios and asks them to choose from a number of courses of action,

profiling them based on their answers. However, concerns have been expressed about


how realistic it is to establish an individual’s normal profile by testing their responses

to extraordinary situations.

From the ancient past to the present, the need to understand human behaviour and

render it more predictable and manageable has fostered profiling. Observing the

number of scandals that have occurred over the past 10 years in the business arena, it

is not surprising that there should be some renewed interest in being able to

understand and predict the likelihood that individuals will engage in ethical or

unethical behaviours. While much of the focus on the ethical renewal of public- and

private-sector organisations has focused on institutionalising ethics through codes of

ethics and other ethics regimes, there clearly remains a need to better understand the

individual factors influencing managerial ethical decision making. Analysing

managers’ facial shapes, and character traits, or testing their responses to

extraordinary scenarios, however, are unlikely to yield practical insights.

When profiling, individuals are clustered into groups using various characteristics as

discriminatory factors. To be successful, these clusters should maximise differences

between the groups, while at the same time minimising internal differences within

the group. In the modern era, profiling has been used in a variety of ways; for

example, marketers profile prospective customers based on age, income, location,

and attraction to innovation (Maenpaa, 2006). Profiling is also applied in the criminal

justice system (Pollock, 2004). Using factors such as gender, ethnicity, race, age,

personal history, abusive childhood, peer pressure, and others factors, profiles are

created to identify the characteristics of the perpetrators of specific crimes (Pollock,

2004). Potential suspects are then identified on the basis of these profiles. However,


profiling in criminal justice is open to justifiable criticisms, not only on questions of

individual rights, but also in regard to issues such as the biasing of profiles through

prejudice and stereotyping, as well as the lack of theoretical and empirical support

for its reliability and usefulness in practice (Pollock, 2004). These misuses of

profiling in the criminal justice domain remind us that the possible predictive

capacity of profiling is always a matter of probability rather than certainty. It is

meant to discriminate between, not against, people. Profiling starts off as a facet of

analysis; that is, the aim of the profiling, in each case, is to identify some factors (or

dimensions) that can discriminate between people, and group them into more or less

homogenous clusters.

To respond to the current needs in the business environment, a new approach to

profiling is overdue—a more realistic and practical approach linked to what

managers are dealing with every day, and one that includes ethics. To further this

aim, Chapter 5 reviews and evaluates a number of tools measuring ethical decision

making in the current literature and then proposes a new method of profiling

managers, based on their ethical preferences. With this purpose in mind, this paper

seeks to answer the research question: can managers be profiled according to the

ethical frameworks that they bring to their managerial decision making? To develop

managerial ethical decision-making profiles, it is important to first identify the

factors that can best facilitate a clustering process based on ethical characteristics.

5.3 Literature review

Usually, when people talk about ethics, they wittingly, or unwittingly, refer to ethical

frameworks that reflect the schools of moral philosophy (Casali, 2008a; Ferrell,


Fraedrich, & Ferrell, 2008). In the area of ethical decision making, there has been a

significant increase, over time, in the amount of research on individual ethical

preferences, from virtually no studies before 1992 (Ford & Richardson, 1994) to 21

studies up to 1994 (Loe, Ferrell, & Mansfield, 2000), and 42 up to 2005 (O'Fallon &

Butterfield, 2005). It is not only the number of publications in the area of ethical

decision making that has increased over time, but also the kind of factors that have

been tested. As suggested by Casali (2008a) and Ferrell et al. (2008), the range of

influencing factors that has been tested over time can be summarised into four major

categories: ethical, individual, organisational, and external. As the focus of this study

is limited to the ethical factors, further analysis of the literature will concentrate on

those tools that have been used to measure the influence of ethics on managerial

decision makers. The most popular instruments used for this purpose are:

the Defining Issue Test (DIT) by Rest (1979; 1990)

the Managerial Judgment Test (MJT) by Lind (1978)

the Ethics Position Questionnaire (EPQ) by Forsyth (1980)

the Managerial Value Profile (MVP) by Sashkin, Rosenbach, & Sashkin (1997).

As indicated by Casali (2008a), all of these instruments have a number of limitations

such as:

All of them make a priori assumptions about to which and to how many

categories each respondent should be allocated.

For example, the DIT aims to allocate respondents into one of the six stages of moral

development created by Kohlberg (1969), and the MVP is focused on identifying

whether those respondents are either driven by utilitarian principles, individual rights

(deontology), or social justice perspectives. When using these tools, individuals are


grouped into predefined profiles.

They use scenarios that are purposely developed to embody an ethical dilemma.

Typically, respondents are provided fictitious situations and then asked what they

would do in each case. Often, they are provided with few options to choose from.

Each option is developed and presented with the assumption that if chosen, it will

indisputably suggest that the respondent belongs in one particular category rather

than the others. Once again, individuals are confronted with a forced-choice situation

but, more importantly, they are asked to think about how they would respond to

situations that they might have never encountered before, rather than asking them

how they already respond to more everyday ethical challenges.

Arguably, it would be better to profile managers according to their ethical

preferences. This would require adopting an a posteriori approach that creates the

clusters and profiles from the responses themselves. In the present study, for

example, respondents were not asked to simply place themselves into one of the four

schools of moral philosophy. Indeed, within each major school, respondents were

offered further options. So, for example, two main approaches to utilitarianism (act

and rule) were represented in the questionnaire. There was also a similar

dimensioning of the scales representing deontology, virtue ethics, and ethical egoism.

These scales were not used to directly represent types; rather, individual responses to

the multidimensional scales were subsequently analysed to determine whether there

was any statistically significant clustering of responses. These statistically significant

clusters were then interpreted by relating the data to recognisable behaviours.

Interestingly, none of the previous studies found that there is a universal ethical way


to make a decision; the one thing that they do agree on is that there is a need for

further research in this area. The variety of approaches taken also confirms that there

is not just one universal definition of ethics operating in the real world. Managers

draw on a number of different ethical frameworks in their decision making. These

differences can be explained by the fact that managers can, for example, look at

ethics in different ways (absolutism, relativism, and pluralism), or tend to favour one

of the major ethical frameworks (outcome-based, duty-based, and person-based).

Profiling managers based on their ethical preferences, then, requires a

multidimensional approach.

5.4 Method

To profile managerial ethical decision making, the MEP questionnaire was

administered to two different cohorts: one consisting of academics and students and

the other consisting of small-business managers.

5.5 Measure

The MEP questionnaire is a scale purposely developed to capture managerial ethical

preferences (Casali, 2007; 2009). The MEP scale consists of 52 items covering a

number of criteria that influence managerial decision making: ethical, individual,

organisational, and external (Casali, 2007; 2009). The first 24 items were purposely

developed as a multidimensional ethical scale representing different principles from

four major schools of moral philosophy: egoism, utilitarianism, virtue ethics and

deontology. The MEP scale comprises eight ethical sub-scales (Casali, 2007; 2009):


1. SS1–Economic egoism represents managerial self-interest, particularly in

terms of the role that economic outcomes such as profit and cost reduction

play in the managerial decision-making process.

2. SS2–Reputational egoism is a sub-scale that refers to managerial self-

interest pursued not in terms of economic outcomes, but by identifying

one’s organisation as an extension of one’s own interests. Therefore, the

manager would act to protect the organisation’s reputation, and they

would protect the organisation’s reputation, possibly even at the expense

of profits.

3. SS3–Act utilitarianism encompasses the idea that in order to create the

greatest overall good it is fundamental to evaluate whether the

consequences of each proposed action will create the greatest benefit for

the greatest number of stakeholders.

4. SS4–Rule utilitarianism expresses the same interest in the greater good,

but, instead of focusing on each separate action, it proposes to establish

and follow those rules which benefit the majority.

5. SS5–Self virtue promotes the idea that good decisions are made by

people who exhibit good individual character virtues.

6. SS6–Others virtue as a particular framework of virtue ethics, concerns

living well with others, promoting social well-being, and would include

what is referred to as care ethics.

7. SS7–Act deontology expresses the notion that the rightness of an act is

not determined by the ruthless application of a moral principle, but by

determining what particular duty is demanded in each particular situation.


8. SS8–Rule deontology focuses on fulfilling universal duties, such as the

Golden Rule, or acting according to universal principles (e.g. justice, not

harming others, doing good, and respecting autonomy) in all situations.

These subsets of principles are not only widely reflected in the current literature on

ethics (Ferrell et al., 2008), but are also confirmed by the preliminary validation of

the MEP scale (Casali, 2007; 2009).

5.6 Sample characteristics

For this exploratory study, two different target populations have been used. The first

sample (Study 1) comprised academics and nursing students (n=41). In terms of

academic staff, 18 university lecturers from different faculties and universities were

asked to answer the questionnaire. In addition, second year nursing students were

asked to fill in the questionnaire, and 23 out of 60 returned it, providing a 38%

response rate. For the second sample (Study 2) small- and medium-sized-business

managers members of a Business Enterprise Centre were approached. Out of 81

people participating at a business networking breakfast, 41 usable questionnaires

were returned providing a 51% response rate.

5.7 Data analysis

As the objective of this study was to classify respondents based on their real ethical

preferences, rather than pushing them into predetermined boxes, HCA was

performed using the eight ethical sub-scales dimensions of the MEP scale. The

decision to use an HCA method was indicated by the fact that this is an exploratory

study and, as such, there are no predefined clusters to be confirmed and, therefore,

using a non-HCA technique such as K-means would not have been recommended


(Maenpaa, 2006). HCA can be used to group cases into clusters based on the

assumption that cases that are close to each other in the input feature space are

similar (Everitt, 1993; Gordon, 1999). HCA begins with all cases as separate clusters

and merges the closest clusters until some criterion is satisfied (Everitt, 1993;

Gordon, 1999). The Euclidean distance was used to measure the distance between

cases in the input feature space. The distance between two clusters was calculated as

the average of the pair-wise distances between them (average linkage method)

(Everitt, 1993; Gordon, 1999). The distance between the clusters merged at each step

was used to determine when to stop the clustering. A large distance between merged

clusters indicates that the two clusters may be so dissimilar that it is inadvisable to

merge them.

HCA was performed by using the individual respondents’ computed results for each

of the eight ethical sub-scales from the two cohorts separately (Figure 5.2 and Figure

5.3). The most common visual data representation used with HCA is a dendogram,

which simply reports the degree of similarities between cases by putting the ones that

are most similar closer together and the ones that are dissimilar further apart. By

scrutinising the graphical outcomes of the two HCAs, it is possible to only identify

the cases that are most similar, rather than the ones that are most dissimilar.

However, for the purpose of this study, which is to profile managers based on the

degree of influence that different ethical principles play in their managerial decision-

making process, two questions have to be asked:

1. What are the unique similarities within the clusters?

2. What are the dissimilarities between the clusters?


In order to answer these questions, it is necessary to further analyse each individual’s

computed score of the eight ethical sub-scales, as the goal of the HCA is to arrive at

clusters of homogeneous people who differ in meaningful ways and display only

small in-cluster variations, but at the same time display a large variation between

different clusters (Hair, Babin, Money, & Samouel, 2003). As previously discussed,

a characteristic for a successful profile instrument is to be able to maximise

differences between clusters, but at the same time to minimise internal differences

(Hair, et al. 2003), thus, two principles have been used to interpret the results of the

HCA. They are:

high internal homogeneity, which generally means that each object included in

a particular cluster has a very strong similarities (for the purpose of this paper

this means that people in a particular cluster has strong similarities in terms of

their ethical preferences).

high external heterogeneity, which means that there are significant differences

between each cluster, and in particular that each cluster represents a unique mix

of preferences about the eight ethical sub-scales (Hair, Black, Babin, Anderson,

& Tatham, 2003; Nunnally & Bernstein, 1994).

Every individual’s computed score from the eight sub-scales was retrieved and

grouped based on the cluster membership from each of the dendograms (Figure 5.2

and Figure 5.3). From the dendogram related to the Study 1 (Figure 5.2), cases were

compared for similarities that would define a cluster. When an anomaly was

discovered, a new cluster was defined and the process of comparison was repeated

until all cases had been allocated to a cluster. For example, the computed results for

case 23 and 32 were put aside, then 39 and 40, then 38, 5 and 8, until an anomaly

was found at case 6, hence creating a new cluster. When all of the respondents and

associated computed scores were sorted into their most relevant cluster by the


allocated number of data entry on the dendogram, then close clusters such as 23 and

32 and 39 and 40 were examined closely to identify either a reason to join them

together or to keep them separate based on their computed results.

5.8 Results

As a result of a process of mix and match based on the two principles (high internal

homogeneity and high external heterogeneity), a number of strong cohesive clusters

were found, and the overall means for each clusters calculated. Thus, five clusters for

Study 1 (academics and students), and four clusters in Study 2 (small business

managers) were found (see Figure 5.2 and Figure 5.3).

Figure 5.2 Dendogram for HCA on academics and students

Figure 5.3 Dendogram for HCA on small-business managers


Even though those two studies have resulted in two different totals of clusters (five in

Study 1 and four in Study 2), closer examination of the pattern of responses in each

cluster, based on the average scores of the eight ethical sub-scales, indicates

similarities between the results of the two studies. In fact, four clusters from Study 2

match four of the clusters from Study 1 (See Table 5.1).

Table 5.1 Comparison of HCA results (computed means) from Study 1 and Study 2 in relation to the eight ethical sub-scales

Study 1 Academics and students

SS1 SS2 SS3 SS4 SS5 SS6 SS7 SS8

Economic Egoism

Reputational Egoism

Act Utilitarianism

Rule Utilitarianism

Virtue of Self

Virtue of Others

Act deontology

Rule deontology

Cluster1 1.8 1.5 1.4 1.5 1.3 1.3 1.6 1.2

Cluster2 2.6 2.1 2.3 1.7 1.5 1.8 1.4 1.3

Cluster4 2.2 2 2.4 1.8 2.6 2.4 2.2 2.3

Cluster3 3.5 3 2.2 2 1.7 1.6 1.4 1.8

Cluster5 2.2 1 1.8 1.2 1.8 1.2 1.3 1.2

Study 2 Small-business managers


Economic Egoism

Reputational Egoism

Act Utilitarianism

Rule Utilitarianism

Virtue of Self

Virtue of Others

Act deontology

Rule deontology

Cluster1 1.1 1.1 1.1 1 1 1.1 1.2 1.1

Cluster2 2.3 2 1.9 1.6 1 1.2 1.5 1.2

Cluster3 2.1 1.9 2 1.6 2.1 1.8 1.6 1.5

Cluster4 2 2.2 2.6 1.6 2.6 1.9 2.3 2

Table developed for this study

5.9 Discussion

Based on the results from the two studies, four clusters with very similar patterns

were identified in both studies, with one extra cluster found only in Study 1. This

result can be accounted for by the particularity of the second sample (small business

managers). It is important to examine each cluster in detail in order to understand

their differences, particularly in terms of the different degrees of influence that the

eight ethical sub-scales have on decision making. Suitably interpreted, each of the


five identified clusters can be treated as an MEP, identifying what ethical

frameworks are likely to routinely influence the decision making of the managers

who were surveyed. The results used in the HCA reflected a five-point Likert Scale,

assessing the importance of each item in the respondent’s managerial decision-

making process, where 1 was extremely important and 5 was not important at all.

Therefore, if for a particular ethical sub-scale the mean computed result is 1, or near

to it, that ethical sub-scale is extremely important for that particular MEP. The results

for the five clusters are shown in Table 5.1.

5.10 Developing the Managerial Ethical Profiles

As previously stated, managers use a number of ethical principles in their decision-

making processes. These principles may be from only one ethical framework

(absolutism) or combined from a number of different ethical frameworks (relativism

or pluralism). Where a manager uses principles from different ethical frameworks, a

further differentiation is needed. If a manager switches between ethical frameworks

depending exclusively on the situation, then they would be included in the ethical

approach called ethical relativism. Based on this view of ethics, ethical principles can

be adjusted according to their fit with a particular situation. On the other hand,

ethical pluralists are those managers who draw principles from different ethical

frameworks—they would argue that there are multiple perspectives on an issue, and

each of those views contain part of the truth but none of them, individually, hold the

whole truth. In more operational terms, for the purpose of this paper, managers who

scored all of the ethical principles equally, and who agree that all of those principles

are extremely important, are considered to be ethical pluralists, and those who scored

ethical principles equally but less important are treated as ethical relativists.


Due to the strong exploratory nature of this study, as the first study using the MEP

scale to profile managerial ethical decision making, the following structure will be

used to interpret the results from the HCA:

Graphically representing each cluster based on their scores on the 8 sub-scales

from the MEP scale (as shown in Table 5.1).

Discussing possible meanings of the results, and how they can be interpreted in

terms of managerial ethical decision making.

Naming the profiles based on their characteristics.

Providing a ‘motto’ to explain each profile in more general terms.

5.10.1 Profile 1: Duty Follower

Figure 5.4 Duty Follower profile according to the eight sub-scales from the MEP scale

Motto: ‘follow duty no matter what the cost.’

This profile is characterised by a very strong preference for non-consequentialist sub-

scales such as deontology and virtue ethics and weak support for economical egoism.

This would suggest that respondents in this cluster see ethics from a particular

perspective and believe that some ethical frameworks are more important than

others. They could, therefore, be also seen as supporting an absolutistic view of

ethics (see Table 5.1). Looking at the items representing the non-consequentialist

ethical sub-scales, it is arguable that the main philosophy behind the ethical decision

making of the managers that belong to this profile is that managers need to possess


strong character virtues in order to fulfil their duties; in particular, their professional

duties. Managers in this profile are committed to being ethical and applying universal

rules in their decision making, and they are quite strongly opposed to allowing

economic outcomes to override principle. Based on the strong propensity to follow

duties, this cluster has been named the Duty Follower MEP. In this case, decisions

are guided more by rules and duties than by considering the consequences of those

actions. They have a more absolutistic view of morality, and they are very strong

advocates for particular universal duties such as do not lie or do not kill. Managers

with this profile are very faithful to rule and duty, but the related risk is that this can

be achieved at the expense of flexibility. For instance, if an organisational rule is to

‘not accept any gifts from clients or suppliers’, then a Duty Follower would not

accept a gift under any circumstances. Therefore, a Duty Follower manager visiting a

Chinese client during the Chinese New Year would turn down a small golden gift—

given as a wish for a prosperous year, as per tradition—despite the likelihood of

offence to the client and their culture. The Duty Follower’s major concern is with the

moral standing of themselves, rather than the consequences for the reputation of the

organisation.

5.10.2 Profile 2: The Chameleon

Figure 5.5 Chameleon profile according to the eight sub-scales of the MEP scale

Motto: ‘when in Rome, do as the Romans do’


This profile is very different from the previous one, due to equal importance being

given to each of the eight ethical sub-scales, rather than a strong preference for a

particular one. However, the responses related to this cluster are not very strong (see

Table 5.1), suggesting that people in this cluster might use different ethical

frameworks, not at the same time, but more instrumentally to a particular situation.

The ethical philosophy behind this profile is that the manager is aware of the

different ethical positions, and will decide which best suits a particular situation.

Managers in this group are not strongly committed to one type of ethical theory;

therefore, they might use particular ethical principles in order to protect the

organisation’s reputation by following those rules that either promote the greatest

good or uphold human principles. This profile has been named the Chameleon. Just

as the reptile of the same name changes its skin colour to fit in with its surrounds,

these managers assess the different ethical viewpoints and decide which is the most

appropriate for a particular situation. Arguably, the Chameleons have a more

practical view of morality, as they do not rigidly hold a particular position but they

assess the context first and then apply the ethical framework that is most appropriate

to that particular situation. However, while this profile is more flexible than the Duty

Follower, there is also a risk that all of this flexibility could simply encourage

decision makers to blend in with the prevailing culture—when in Rome, do as the

Romans do—rather than engaging with it proactively. Relatively speaking,

Chameleons, compared to others profiles, have less independence in their ethical

decision-making capacity because they are strongly affected by others of significance

(experts or superiors) and the organisational culture. Using a business example, a

Chameleon would be more likely to accept an expensive gift with no reservation, and


most likely keep it as well, if that is a common practice in that country. Too many

Chameleons in an organisation may be a barrier to effectively challenging and

changing unhealthy organisational cultures.

5.10.3 Profile 3: Guardian Angel

Figure 5.6 Guardian Angel profile according to the eight sub-scales from the MEP scale

Motto: ‘follow those duties that promote the greatest good’

In this profile, like the Duty Follower, all of the non-consequentialist ethical sub-

scales, plus rule utilitarian, are the most important—a combination that can be

summarised as managers who not only make sure that they conform to rules and that

the dignity of others is maintained, but also keep an eye on the overall outcomes (the

greatest good for the greatest number). They are strongly committed to fulfilling the

obligations that go with a public or professional role and, therefore, they feel a duty

to consider the consequences of their decisions and to treat others fairly. Due to very

nature of this profile, which is to protect and to guide, it has been named the

Guardian Angel. Like the Duty Followers, managers in this group tend towards an

absolutistic view of ethics, but are not as narrow. They obey rules but, at the same

time, they use their wisdom to consider the impact on others of so doing. Thus, if

offered a gift by a client they would not turn it down simply because the


organisation’s code of conduct strictly prohibits accepting gifts; they would weigh up

honouring the duty of ‘not accepting a gift’ against the duty to protect organisational

reputation and respect for other cultural traditions. They would accept the golden gift

at Chinese New Year. A risk with this profile is that the potential conflict between

duties may lead to inconsistent responses.

5.10.4 Profile 4: The Defender

Figure 5.7 Defender profile according to the eight sub-scales from the MEP scale

Motto: ‘the defender of the faith’

The results for this cluster are not only strong on the non-consequentialist ethical

sub-scales (SS8, SS7, SS6, and SS4) but also equally strong, if not stronger, on SS1–

Reputational Egoism. Managers in this group are very loyal to the organisation, and

they would make decisions to protect the reputation of the organisation. Good public

opinion about oneself and one’s organisation are more important than the bottom

line. People in this profile would spend more time weighing up what is good versus

what is good for the organisation. The virtues of the people in this cluster are

directed strongly towards the well-being of their organisation. Those people are


extremely important for the company because they are the most loyal to the

company, and are less likely to undermine its goals by pursuing their own individual

self-interest (Casali, 2008a). However, the excessive loyalty of the Defender is not

always helpful. Due to the fact that Defenders have scored low on the sub-scale of

self virtue, it may indicate a lack of focus on internal morals. This situation could

increase the chances of engaging in illegal or unethical actions in order to protect the

organisation’s reputation. Like an avid Defender in a soccer team, they would accept

the risk of a penalty or being sent off the field—by taking down an opponent in front

of goal—for the good of the team. Another example would be the behaviour of some

employees of the Australian Wheat Board (AWB). Its former chairman, when

accused of bribe and breaching a number of United Nations oil-for-food sanctions,

said in a statement issued by his lawyers: ‘I emphatically deny that I acted in any

manner other than in the best interest of AWB and its shareholders’ (McMahon,

2007). Going back to the example of the Chinese gift, managers in this profile would

accept the gift only if that action would benefit the organisation.

5.10.5 Profile 5: The Knight

Figure 5.8 Knight profile according to the eight sub-scales from the MEP scale

Motto: ‘Being the best I can be, doing the best for everyone, and doing the right

thing in all situations’


The final profile identified in this study represents the viewpoint of ethical pluralism.

The average results on all of the eight ethical sub-scales are between 1 (extremely

important) and 2 (very important). This MEP has been named the Knight. These

managers are strongly influenced by a large number of factors, a fact that suggests

that they are constantly searching for the best balance between their own values and

the organisation’s values, and also keeping an eye on both economic factors and the

impact of decisions on all stakeholders. They try to maximise the good in both

themselves and the world around them. Their desire is to pursue happiness and

excellence, be a good person, work for a good organisation, and build a better world

(Morse, 1998). Managers who are part of this profile are ethical pluralists, but in a

much stronger sense than the Chameleons. They will take into consideration all of

the individual moral principles and put them into a more universal than local context.

A possible downside of being the only profile representing ethical pluralism is that

the knight might have too high an expectation about their leaders’ and their

organisation’s espoused values and therefore can be easily disappointed (Minkes,

Small, & Chatterjee, 1999).

As previously suggested, the five MEPs represent a mix of ethical principles that

managers are influenced by in their managerial ethical decision-making processes.

For example, the Duty Follower is a profile that characterises managers as strongly

devoted to following duties and, in the event of competing duties, would prioritise

them not based on expected economic outcomes, but on fulfilling universal duties or

protecting rights. The Guardian Angel is similar to the Duty Follower; however, the

main difference between the two is grounded in the idea that Guardian Angels would


follow duties that not only create the greatest good for the greatest number of people

but also maintain respect for the individual. On the other hand, the Defender profile

suggests that managers would prioritise choices based on the degree of impact that

those possible options would have on the organisation’s reputation even at the

expense of profit or fulfilling universal duties. The Chameleon is the most relativist

profile of all, suggesting that managers in this profile are strongly influenced by

other colleagues of significance or by the organisational culture, or both, as they are

aware of the different conflicting ethical principles, but have not developed a

framework for prioritising them in the event of conflicting principles. Last, but not

least, is the Knight. In contrast to the Chameleon, managers in this profile have

developed that framework to assess conflicting principles, and underpinned it with

their personal and professional experience and wisdom. A Knight profile suggests

that managers would strongly rely on their own skill and knowledge and be less

influenced by significant others or the organisation.

5.11 Conclusion

A problem of many current ethical decision-making profiling techniques is that they

use a priori clusters based on pre-existing schools of moral philosophy, which

reduces the capacity to adequately capture the reality of decision making. This paper

has established that allowing respondents to create their own clusters, rather than

being simply allocated into one of the schools of moral philosophy, can significantly

advance current understandings about managerial ethical decision making in

practice. Giving respondents the opportunity to pick and choose particular

dimensions reflecting different ethical frameworks has led to the development of a

number of a posteriori clusters. As a result of this study, five clusters have been


identified in the first study and only four have been found in the second study, which

can be explained by the nature of the second cohort. The missing profile from the

second study is the Duty Follower, a profile characterised by a strong devotion to

universal principles and organisational duties but a strong disregard for economical

factors (see Table 5.1). While people working in large organisations may have the

luxury of letting someone else look after the bottom line, it is arguable that small-

business managers, by their very nature, cannot disregard the bottom line; otherwise,

they would be out of the business immediately. It is important to emphasise that

although all five profiles are ethical, they would look at the same problem and assess

it based on different criteria. For example, a Duty Follower would make sure that

universal rights and duties have been fulfilled, even at a great cost in terms of money,

efficiency, or effectiveness; whereas a Chameleon would mostly ask an expert

opinion and follow that advice. A Knight would look at a problem from all points of

view and then try to find a solution that would maximise the benefit to all. The

Defender would make any decision that would improve an organisation’s reputation

or at least protect it at all costs. Last, the Guardian Angel would seek to satisfy

universal duties, but also take economic factors into account, thereby seeking the

greatest good for the greatest number of people but not at the expense of the

business.

5.12 Possible practical application for the MEP scale

Despite the fact that this is exploratory research, some possible practical use for the

MEP scale can be suggested. The MEP scale could be used in assessing possible

board members: having each of the five profiles represented could increase a board’s

effectiveness and efficiency and reduce the risk of groupthink. At the individual


manager level, the MEP scale can be used as a means of self education, informing

individuals about their ethical strengths and weaknesses (based on their profile). The

MEP scale could also be used by a multinational organisation to map their

subsidiaries around the globe based on the concentration of the different MEPs. They

would be able to better assess the risks associated with giving a high degree of

decision-making autonomy to a subsidiary with a strong concentration of Duty

Followers looking for some rules to follow. Knowing that the managers in an

organisation have differing ethical decision-making profiles would also assist in

tailoring ethics training, and internal communication on ethical issues, to the

workforce, with trainers and senior management knowingly adopting a variety of

strategies to more successfully communicate and implement ethical regimes.

5.13 Future research and limitations

The purpose of this study is to use statistical techniques (HCA) to identify clusters

based on responses to the MEP questionnaire. Further research in this area is needed

to address a number of questions and to advance understanding about the MEPs

themselves. Questions that should be further investigated include:

Are the MEPs stable across different countries, sectors, and cultures?

Are there any particular individual traits that belong to a particular profile?

Does organisational size affect MEPs?

The results of this study indicate that the MEP scale will be a useful instrument for

further inquiry into managerial ethical decision making. As this is only an

exploratory study based on the preliminary results of two rather small samples (41

respondents), the findings should be viewed with some degree of caution in terms of

their generalisability. Nevertheless, each of the two samples were analysed using a


statistical tool that performs best with small sample data and performs in a reliable

and valid way—this paper reproduced four of the five overall ethical profiles across

the two studies.

5.14 Footnote

The five profiles discovered in Study 1 were also found in a larger study based on

441 health care managers in Australia. A paper reporting the findings of this more

confirmatory research has been presented and published in the peer review section of

the ANZAM (Australian and New Zealand Academy of Management) 2008

conference proceedings.


PART 3:

The main study results and conclusion

Part 3 begins with a chapter on the MEP scale development (Chapter 6) based on the

results from the survey of 441 health care managers in Australia. This is followed by

a chapter that validates the five profiles that were found as part of the pilot study

section of the thesis (Part 2), based on a large sample (n=441).

The purpose of Chapter 6 is to develop a scale to test the multidimensional model

developed in Chapter 3. It reports the further development of the MEP scale, which

is capable of measuring the degree of influence that ethical factors have on

managerial decision making.

Chapter 7 fully implements the horizontal approach to ethical decision making

described in paper 2 (Chapter 3) by analysing more than 40 factors influencing health

care managers in Australia. A range of individual, external, and organisational

factors are measured and analysed with reference to the ethical profiles.

Chapter 8 concludes the thesis by restating the research question, summarising the

results, reviewing the limitations of the research, and offering suggestions for further

research.


Chapter 6

Developing a multidimensional scale for

ethical decision making

6.1 Abstract

This chapter reports on the development of the Managerial Ethical Profile (MEP)

scale. The MEP scale is a multilevel, self-reporting scale measuring the perceived

influence that different dimensions of common ethical frameworks have on

managerial decision making. It is designed to be particularly but not exclusively

applicable in the context of health care management. The MEP scale measures on

eight sub-scales: economic egoism, reputational egoism, act utilitarianism, rule

utilitarianism, self virtue of self, virtue of others, act deontology, and rule

deontology. Confirmatory Factor Analysis (CFA) was used to provide evidence of

scale validity. Future research needs, and the value of this measure for business

ethics, are discussed.

6.2 Introduction

Increasingly, in order to reduce the likelihood of unethical business practice,

organisations, governments, and managers are seeking new ways to better understand

what guides managerial ethical decision making. Recently, there have been high-

profile examples of the catastrophic impact that unethical decisions taken by

executives have had on stakeholders. The energy company, Enron Corp., and the

telecommunication company, WorldCom, are two prominent examples of how the


wrongdoings of executives can not only end in bankruptcy for the company

concerned, but can also, through a snowball effect, financially and emotionally

devastate employees, investors, suppliers, customers, partners, and governments.

It has been both theoretically argued and empirically tested that an individual's

ethical beliefs or ideology influence their approach to ethical judgments and decision

making (Barnett, Bass, & Brown, 1996; Barnett, Bass, Brown & Hebert, 1998;

Davis, Johnson, & Ohmer, 1998; Forsyth, 1980, 1981; Whitcomb, Erdener, & Li,

1998). Arguably, knowing what influences managers in their decision-making

process, and, more specifically, what ethical principles they attempt to satisfy when

making business decisions, could help to diminish the likelihood of further corporate

scandals. One possible positive contribution towards increasing ethical practice in

organisations, then, would be a capacity to accurately assess these ethical factors that

influence the ethical decision-making capabilities of individual managers and to

tailor educational and administrative needs accordingly.

Measuring ethical decision making is not a new topic, and there are number of scales

that have been used over the years to offer insights on this matter. For example, the

Defining Issues Test (DIT) by Rest (1979) has been used in many studies to measure

stages of moral development (Shawver & Sennetti, 2009; Woodward, Dais, & Hodis,

2007; Rogers & Smith, 2001; Paradice & Dejoie, 1991), while the Ethics Position

Questionnaire (EPQ) by Forsyth (1980, 1981, 1985, and 1992) has also been used to

ascertain ethical ideology (Davis, Andersen & Curtis, 2001; Etter, Cramer, & Finn,

2007). Similarly, the Managerial Judgment Test (MJT) by Lind (1978), which has

been administered to about 15,000 participants (Gross, 1997), measures moral


judgment (Moutatidou, Goutza & Chatzopoulos, 2007; Comunian & Gielen, 2006),

and the Managerial Values Profile (MVP) by Sashkin et al. (1997) focuses on

measuring individual ethical preferences (French & Casali, 2008; Zgheib, 2005).

Finally, the Multidimensional Ethics Scale (MES) by (Reidenbach & Robin, 1988;

1990) is used also to measure individual ethical preferences (Gupta, 2010; Jung,

2009; Cohen, Pant & Sharp, 2005). All of these tools have areas of strength and they

all have enhanced understanding of ethical decision making, but they also have a

number of flaws. If these were eliminated, it could greatly contribute to our current

knowledge of ethical decision making.

The aim of this paper is to develop and validate the MEP scale, a new scale

purposely developed to overcome some of the flaws that limit the current tools for

ethical decision making.

6.3 Literature review of tools for measuring ethical decision making

A number of instruments or scales (see Table 6.1) that measure ethical decision

making have been identified in the literature by reviewing articles that have

empirically tested this matter in order to profile ethical decision makers. All of the

scales identified from the current literature (see Table 6.1) investigate ethical

decision making by using one or more of the following three approaches:

1. Testing levels of moral development based on Kohlberg’s stages of moral

development (Rest 1979; Lind 1978, 1995).

2. Testing individual preferences with respect to relativism and idealism

(Forsyth 1980, 1981, 1985, 1992).


3. Testing individuals by categorising them according to ethical principles:

egoism, utilitarianism, social justice, and individual rights perspectives

(deontology) (Sashkin et al., 1997; Reidenbach & Robin, 1988; 1990).

The first two scales, the Defining Issue Test (DIT) by Rest (1979) and the

Managerial Judgment Test (MJT) by Lind (1978; 1995), have been extensively used

to investigate ethical decision making (Vitell & Ho, 1997). Both have been designed

around Kohlberg’s (1969) theory of cognitive moral development; what

differentiates them, however, is their approach to measuring cognitive moral

development. The DIT focuses on measuring the extent to which an individual uses

principled considerations in making moral decisions (stages 5 and 6 in cognitive

moral development according to Kohlberg), or what is also known as stage

preference. The MJT on the other hand determines how consistently an individual

follows a particular principle, or what is known as stage consistency (Ishida, 2006).

Both tests use responses to ethical dilemmas to determine the respondent’s stage of

moral development (Ishida, 2006). They exhibit two major weaknesses when applied

to business decision making. Firstly, respondents are asked to imagine themselves in

fictitious scenarios that were developed with the precise intent of stimulating a moral

reaction. While offering some valuable insights, this might not fully represent what

the respondent would normally do in a similar real-life situation (Krebs & Denton,

2005). Secondly, both tests are designed so that respondents must fit into either one

stage of moral development or another; the possibility that they might sit between

these stages is excluded.


Table 6.1 Summary of five tools for measuring ethical decision making

Tool Scenario-based

Forced

choice

Mutually

exclusive

categories

Non-value-neutr

al

Moral theories

Multi dimension

al categories

Defining Issue Test (DIT) by Rest

(1979) Yes No Yes Yes No No

Managerial Judgment Test (MJT) by Lind

(1978)

Yes No Yes Yes No No

Ethics Position Questionnaire (EPQ)

by Forsyth (1980,1981,1985,19

92)

No No Yes No No No

Managerial Value Profile (MVP) by

Sashkin et al. (1997) No Yes Yes No Yes No

Multidimensional Ethics Scale (MES) by Reidenback &

Robin (1988, 1990)

Yes No No No Yes No

Another three scales that have been used to measure ethical decision making are the

Ethics Position Questionnaire (EPQ) by Forsyth (1980, 1981, 1985, 1992), the

Managerial Value Profile (MVP) by Sashkin et al. (1997), and the Multidimensional

Ethics Scale (MES) by Reidenbach and Robin (1988, 1990). Forsyth (1980)

developed the EPQ to assess personal moral philosophy. It asks individuals to

indicate their acceptance of items that vary in terms of relativism and idealism. The

relativism scale, for example, includes such items as: ‘different types of moralities

cannot be compared as to “rightness”’ and ‘what is ethical varies from one situation

to another’. The idealism scale, on the other hand, measures one’s perspective on

positive and negative consequences, with such items as: ‘a person should make


certain that their actions never intentionally harm another even to a small degree’ and

‘if an action could harm an innocent other then it should not be done’ (Forsyth,

1980). Overall, high scorers on the idealism sub-scale of the EPQ more strongly

endorse items that reflect a fundamental concern for the welfare of others, whereas

those who receive high scores on the relativism sub-scale of the EPQ tend to espouse

a personal moral philosophy based on the rejection of moral universals (Forsyth,

Nye, & Kelley, 1988).

The MVP (Sashkin et al., 1997) uses 12 forced-choice items to ascertain the values

that guide an individual’s decision making. The scale comprises 24 items, eight for

each of three ethical frameworks used as guiding values in decision making:

utilitarianism, individual rights (deontology), and social justice (Zgheib, 2005). The

expected result for the MVP is a score varying from 0 to 8 for each of the three

ethical frameworks tested. The respondent’s ‘profile’ is designated as the ideology

with the highest score. The last instrument for measuring ethical decision making is

the MES, developed by Reidenbach & Robin (1988, 1990). This scale summarises

five ethical philosophies: justice, relativism, egoism, utilitarianism, and deontology.

The MES is a multi-item scale that asks respondents to indicate the extent to which

they believe a given scenario is ethical, based on the different ethical criteria

(Reidenbach & Robin, 1988; 1990).

By looking at Table 6.1, it is possible to see that the most common profiling

instruments for ethical decision making have a number of flaws, some which belong

to all instruments and some specific to few of them. Most of the instruments tend to

concentrate on psychological aspects rather than moral theories. Both the DIT and


the MJT are based on the theory of moral cognitive development by the psychologist

Lawrence Kohlberg (1979), and the EPQ focuses on the dichotomy between

relativism and idealism (two views of ethical principles). Only two out of five

instruments reviewed in this paper account for the possible influence of moral

theories themselves rather than moral cognitive development: the MVP assesses

utilitarianism, individual rights (deontology), and social justice; the MES measures

justice, egoism, utilitarianism, and deontology. However, none of the instruments

take into account virtue ethics—an important moral theory that has been found

capable to influence ethical decision making.

Of those studies that do take into account moral theories, none use a

multidimensional approach to ethical frameworks; they all tend to treat ethical

frameworks such as egoism, utilitarianism, and deontology as unidimensional. The

vast majority of instruments (except the MES) use mutually exclusive categories, a

feature that limits the capacity to capture possible crossovers between the different

categories. As people do not necessarily fit into only one category, or draw upon

only one framework to make ethical decisions in all situations, this limitation could

reduce the importance of the findings and the ability to use them to profile managers

based on their actual ethical preferences.

Reviewing the specific flaws for each of the instruments, the DIT, MJT, and MES

use scenarios purposely developed to provoke an ethical response. The MVP uses 12

forced-choice items—respondents have to choose one statement over the other—and

it assumes that people will clearly belong to one of the three specified value systems

(Sashkin et al., 1997). There is, therefore, a lack of precision. By forcing respondents


to choose between two competing items, their answers might not be realistic. They

may have wanted to pick one of the other items also. Furthermore, the instrument

does not measure the intensity of ethical preference—there is no way to know how

strong or weak their choices were. In other words, this instrument does not measure

the degree of importance that each respondent attaches to each of the 24 items. The

MES is the only instrument that measures the degree of influence of different ethical

frameworks and that at the same time allows respondents to score across the different

factors. However, even this tool does not address virtue ethics as a category in ethical

decision making, and also does not consider that moral theories are themselves

multidimensional. It is clear, therefore, that the current tools available to measure

ethical decision making are less than optimal for profiling managerial ethical

decision making and a more complex, but at the same time holistic, approach to

managerial ethical decision making is overdue.

The shortcomings identified in the current ethical decision-making profiling tools

provide a clue to possible improvements to profiling ethical decision making,

particularly by improving the multidimensionality of the ethical frameworks

influencing ethical decision making. Many of the current generation of managers

have been introduced to these various major forms of moral theory—albeit not to the

depth that would satisfy a dedicated philosopher—in their business ethics training.

Even where this is not so, it is arguable that the various major ethical theories, such

as egoism, utilitarianism, virtue ethics, and deontology, reflect high-level

systemisation of approaches already intuitively taken in everyday decision making

(Jamieson, 1991, p. 479). Given that moral theories will, to some degree, influence

decision making in the workplace, then, the MEP scale attempts to measure the


degree of that influence in a way that overcomes the shortcomings of previous

studies, which have given little attention to the multidimensionality of these ethical

frameworks.

Specifically, the present study has developed a self-reporting instrument

(questionnaire) that can, by measuring the degree of influence of different ethical

principles, generate a profile of each manager’s ethical decision-making style. Such

an instrument can form the basis of self-assessment or be used to identify strengths

and weaknesses in the decision-making capabilities of management teams in both

small and large organisations.

6.4 Theoretical assumptions for the MEP scale

The first task in developing this new scale is to identify a number of theoretical

assumptions that can be used as pillars of the MEP questionnaire.

Assumption 1: Managerial ethical decision making incorporates a number of

ethical criteria, articulated in day-to-day business practice terms, that reflect

the various major schools of moral philosophy.

The initial development stage of the MEP scale converted the different norms,

values, and definitions of the four major schools of moral philosophy into items to be

included in the new scale as a practical list of multiple criteria for managerial

decision making.


Assumption 2: Each ethical criterion of the MEP scale will hold the same

value, and the different profiles that arise from the analysis of the data will not

be viewed as more or less ethical than each other.

In philosophical circles, the relative merits of the various moral theories, including

the four major schools of moral philosophy (ethical egoism, utilitarianism,

deontology, and virtue ethics) are vigorously contested, with various authors arguing

that one system or another is more rationally grounded than the others. A number of

scholars have argued for a pluralist approach—each respective theory is suited to

solving different moral dilemmas in differing situations and therefore each school of

moral philosophy is morally acceptable (Hinman, 2003). Postov (2006) also views

ethical pluralism as a meta-ethical stance that recognises competing moral views or

schools of moral philosophy as morally valid. At the outset, a difficulty confronting

the development the MEP scale was how to construct a questionnaire that did not

embed the kind of hierarchical assumptions about these various systems that have,

for example, dogged the Kohlbergian approach. Kohlberg’s (1969) theory, for

example, established a hierarchy from egoism at the lowest level to deontology at the

highest, with context-based decision making seen as less ethical than that done from

a more universal viewpoint. The present study seeks to avoid these hierarchical

assumptions. Because the MEP scale is profiling decisions made in organisations,

and an organisation principally exists to fulfil its organisational mission, the

teleological approach, of which ethical egoism is one expression, for example, will

naturally tend to be more deeply embedded in managerial decision making. Also, as

it is the task of the MEP scale to measure the relative influence of the various moral

frameworks on an individual manager’s decision making, it would be detrimental to

make a priori assumptions about the relative worth of these differing ethical styles.


As the purpose of the study is to measure the actual differences in these factors, the

various schools of moral philosophy and the criteria have been equally weighted in

the test instrument.

Assumption 3: Each school of moral philosophy is multidimensional.

A school of moral philosophy is not conceptually unified; each school has different

dimensions, and, therefore, managers could be influenced by one particular

dimension of a given school but not by others. For the purpose of this study, two

dimensions for each school of moral philosophy have been chosen.

Ethical egoism is the school of moral philosophy or ethical framework that judges

the ethicality of an action based on outcomes that maximise the interests of an

individual. It is ethical egoism, rather than psychological egoism, because the ethical

egoist argues that everyone, not just oneself, should act out of self-interest. In the

business context, this ethical egoism may be expressed in two ways: by maximising

economic outcomes or by maximising reputational outcomes. One dimension would

promote the best outcomes for the individual agent (me or, by extension, my

organisation) in terms of economic interests—fulfilling economic criteria such as

profit and reduced costs—while the other dimension would be focused on

reputational interests—protecting and enhancing the status or reputation of one’s

organisation. For example, Schnietz and Epstein (2005) found that “a reputation for

social responsibility protected firms from stock declines associated with crisis, even

when controlling for possible trade and industry effects” (p. 327). If this is the case,

then ethical egoism would not necessarily preclude corporate social responsibility.

For managers, ego focus can be individual or organisational because,


psychologically, individuals can identify their organisation as an extension of

themselves. They can identify with the organisation so strongly that they would act

in a way to protect its reputation, in their own interest, perhaps even at the expense of

potential profit.

The ethical framework of utilitarianism is also consequentialist but focuses on

creating the greatest overall good for the greatest number of people when considering

the consequences of any actions. Within this school, there are two main

dimensions—act utilitarianism and rule utilitarianism (Frankena, 1973; Rallapalli,

Vitell, & Barnes, 1998; Veatch, 1998; Hinman, 2003; Casali, 2007). Act

utilitarianism encompasses the idea that in order to create the greatest overall good it

is fundamental to evaluate each proposed action as to whether it will create the

greatest benefit for the greatest number of people (stakeholders). Rule utilitarianism,

on the other hand, does not focus on discrete actions but proposes that one ought to

follow those rules that would benefit the majority.

While utilitarian frameworks assess the external effects of actions, the virtue ethics

framework is focused internally on the individual, either on individual character

traits (self virtue) that promote personal well-being, or living well with others and

caring for others (other virtues). This latter dimension within the school of virtue

ethics would include a contextual morality, which many feminists defend (Gilligan,

1977), including an ethics of care or responsibility.

Deontological ethics focus not so much on either actions or character traits but prima

facie rights and duties (Frankena, 1973; Rallapalli, Vitell, & Barnes, 1998; Veatch,


1998; Hinman, 2003; Casali, 2007). Rule deontology, the main form of deontological

ethics, focuses on fulfilling universal duties, such as the golden rule, or acting

according to universal principles (for example, justice, not harming others, doing

good, and respecting autonomy) that would apply to all agents in all situations

(Frankena, 1973; Casali, 2007). According to act deontology, however, the rightness

of an act is not determined by the ruthless application of a moral principle, but by

determining more intuitively what universal duties are demanded in the particular

situations (Frankena, 1973; Casali, 2007).

6.5 Method

The items for the MEP questionnaire were developed using a two-step process

(DeVellis, 2003). The first step involved reviewing the current literature on business

ethics, ethics, philosophy, and religion as an initial source of information for the

development of the items. The second step was to identify and consult with experts

in the above fields for validation of items and possible adjustments. A total of 34

statements were developed and then refined to 28 statements through comparison

with the literature. A content validity test of these 28 items was performed by

interviewing 14 experts in the area of moral philosophy, business ethics, and religion.

The experts were asked to check the appropriateness of assigning these 28 items to

the eight dimensions of the major ethical theories. Four items were found

inappropriate for inclusion in any of the dimensions by the majority of the experts

and were therefore eliminated from the scale, leaving 24 items in the final survey

(see Appendix 1). The scale items were measured on a five-point scale ranging from

‘extremely important’ (=1) to ‘not important at all’ (=5). There were no reverse-

coded statements in the scale. The questionnaire was distributed by e-mail to 2,473


managers from the health care industry in Australia. The collected responses (n=441)

were analysed for their scale properties using a CFA using the Amos™ 7.0 structural

equation modelling software. CFA seeks to determine if the number of factors and

the loadings of measured variables (indicators) conform to what is expected on the

basis of a priori theory. Indicator variables are also selected on the basis of a priori

theory, and factor analysis is used to see if they load as predicted on the expected

number of factors. The researcher’s a priori expectation is that each factor (the

number and labels of which may be specified a priori) is associated with a specific

subset of indicator variables. A minimum requirement of CFA is that the number of

factors in the model be hypothesised beforehand, but also which variables will load

on which factors will also be posited. For the purpose of this study, eight factors are

considered: economic egoism, reputational egoism, rule utilitarianism, act

utilitarianism, virtue of self, virtue of others, act deontology, and rule deontology. In

developing the MEP scale, this study has used CFA as the main strategy to assess the

psychometric properties of the scale. CFA is used to test theory, and this study has

created the eight ethical sub-scales construct to be tested.


Table 6.2 MEP scale item loadings: Model A (eight-factor model)

Factors/Items Loading AVE CR

Economic Egoism 1. providing the highest economic return (profit)

for the organisation .57

2. minimising costs for the organisation .80 .55 .72 3. optimising resources of the

district/hospital/unit/dept .67

Reputational Egoism 1. protecting the reputation of the organisation .74 .69 .65 2. being in line with the organisational mission .65

Rule Utilitarianism 1. not harming the clients/patients .41 2. respecting organisational rules and regulations

that have been created for the greatest benefit for all stakeholders

.61 .51 .41

Act Utilitarianism 1. creating the greatest overall benefit for the local

community .92 .85 .84

2. creating the greatest overall benefit for the wider community

.79

Virtue of Self 1. being most in line with your core personal values .83 .87 .86 2. being most in line with the person you want to

be .91

Virtue of Others 1. respecting dignity of those affected by the

decision .78

2. being able to empathise with clients .75 3. acting openly when making decision .66 .69 .86 4. making ‘care for the sick’ paramount in

determining decision alternatives .58

Act Deontology 1. giving the opportunity to all affected parties or

their representatives to have input into the decision making process

.63 .81

2. treating others as you want others to treat you .76 .68 .88 3. treat people as ends not as means .66

Rule Deontology 1. ensuring that confidentiality is maintained at all

times .73

2. maintaining a fair process at all times .84 .78 3. ensuring that the organisation “duty of care” is

maintained at all times .76


6.6 Research sample

The MEP scale was finalised and converted into an online instrument linked to an e-

mail message sent to the members of a professional association of health care

managers in Australia with 2,473 members. As a result of this study, 441 usable

questionnaires were returned, which is equal to a response rate of (18%). Of the

sample, 244 (55.3%) were female and 197 (44.7%) were male. The mean age was 44

(SD=.921). Almost half of the people in the sample were middle managers (43.8%),

16.1% were senior managers, 15% corporate governance, 13.2% supervisors, and

12% consultants. 79.4% had undertaken postgraduate studies of some kind, and

20.6% had an undergraduate degree. The majority of respondents in the sample

(62.1%) worked for the government, 28.3% for the private sector, and 9.5% for

religious organisations. In terms of work experience, 30.8% of the sample had three

years or less of experience, 49% had more than three but no more than 10 years of

experience, and 20% had more than 11 years experience. The largest group of

respondents were administrative staff, 268 (60.8%), 118 (26.8%) were medical

(doctors and nurses), and 55 (12.4%) were allied health staff.

6.7 Results

Construct validity was assessed by identifying the concepts underlying respondents’

scores on this scale. To determine if the scale had a meaningful component structure,

it was factor analysed. Using the data collected from the sample (n=441), six models

(see Table 6.3) were tested using AMOS™ 7.0 SEM software. The item loading (see

Table 6.2) varied between 0.4 and 0.9, which is an acceptable result (McDonald,

1999).


The fit of the model was assessed using indices such as: chi square, Relative Fit

Analysis, Root Mean Square Error of Approximation (RMSEA), Confirmatory Fit

Index (CFI), Adjusted Goodness of Fit (AGFI). The chi square (χ2) statistic assesses

absolute fit of the model to the data, and a non-significant χ2 supports the perfect fit

of the model. Two recognised limitations of the χ2 statistic are its sensitivity to

sample size and its assumption of the correct model. Therefore, no restrictive model

with positive degrees of freedom is able to fit real data, and such models will often

be rejected by a formal significance test with a sufficiently large sample. The relative

fit of a proposed model can be assessed by using different goodness of fit indices.

For example, as the ratio of chi square to degrees of freedom (χ²/df) (Hoelter, 1983)

decreases and approaches zero, the fit of the model improves. In particular, the

values of 3.00 or less indicate an adequate fit (Byrne, 1989). Accordingly, other fit

indices must be used for judging model fit. The RMSEA represents closeness of fit,

and values approximating 0.06 and 0 demonstrate a close or exact fit of the model

(Kline, 2005). In addition, a CFI greater than or equal to .9 suggests an acceptable fit

and greater than .95 a good fit (Kline, 2005).

Table 6.3 Results of Confirmatory Factor Analysis

Model CFI SRMR RMSEA χ² df χ²/df Λ χ² Λdf P-value

Model A (a priori 8-factor structure)

.933 .0467 .057 393.75 161 2.44

Model B: baseline (1-factor structure)

.919 .0601 .060 459.59 178 2.58 65.84 17 0

Model C (4-factor structure)

.924 .0557 .059 441.03 176 2.50 47.28 15 0


Notes. Deontology =act deontology and rule deontology; Virtue Ethics= virtue of others and virtue of self; CFI = comparative fit index; RMSEA = root mean square error of approximation; SRMR=standardised root-mean-square residual. The CFI range from 0 (poor fit) to 1 (perfect fit); values of .95 or higher are indicative of a good model fit. RMSEA values lower than .08 are considered to reflect adequate fit, values less than .05 to .06 indicate good fit. SRMR value less than .08

As suggested by Kline (2005, p. 180), a first step in testing for discriminant validity

of a model structure with multiple latent factors is to reject the possibility that a

single factor structure (baseline model) fit the data well. The baseline model in this

paper (Table 6.3, Model B) demonstrated a poor fit of the data: χ² (178) = 459.59,

p<.001; CFI = .919, RMSEA = .060, SRMR = .0601. The second step towards

validating the fact that the eight-factor structure fits the data better is to reject the

model that supports the thesis that the schools of moral philosophy are

unidimensional and, therefore, a four-factor structure (Table 6.3, Model C)

demonstrates only a marginal adequate fit of the data (χ² (176) = 441.03, p<.001; CFI

= .924, RMSEA = .059, SRMR = .0557). Also, seven latent factors have been tested

against the eight-factor model structure (the model supported by this paper) by

combining highly correlated sub-scales, but they all resulted in a poor fit (see Table

6.3). However, the eight-factor structure (Table 6.3, Model A), supported in this

Model D1 (7-factor structure (deontology combined)

.921 .0491 .061 444.01 168 2.64 50.26 7 0

Model D2 (7-factor structure (virtue ethics combined)

.880 .0539 .075 586.80 168 3.49 193.05 7 0

Model D3 (7-factor structure) (virtue of others and act deontology combined)

.922 .0492 .061 439.54 168 2.62 45.79 7 0


study, had an acceptable fit: CFI=.933, RMSEA= .057, SRMR= .0467, even though

the chi square was significant: χ² (161) = 191.60, p>.001.

Moreover, the a priori eight-factor structure fits the data significantly better than any

of the alternative models (see Table 6.3). A chi-square difference test was calculated

on the differential results from the eight-factor structure and all the other models

including the baseline model, and, due to the fact that all the results were significant

(less than .001), this indicates that the eight-factor structure fits the data better than

any other competing models. This result provides evidence of cross-validation for the

new MEP scale.

Even though the eight-factor structure fits the data better than any of the other

models tested in this paper, some issues were identified with regards to the internal

consistency of some of the eight latent factors. The rule utilitarianism factor shows

relatively low item loading (.41 and .61) and also a low composite reliability (CR)

score of .41. Another factor that will need same improvement is reputational egoism

due to the factor loadings of .74 and .65, and a CR score of .65. The fact that rule

utilitarianism shares a rather high percentage of variance (.754 shown in Table 6.4)

with reputational egoism indicates a need to further develop these items in order to

increase their discriminant capacity, and to develop new items to strengthen the other

factors as well.


Table 6.4 Correlation, average variance extracted (AVE), and shared variance estimates for Model A


SS1 .55 .567 .056 .397 .164 .191 .257 .233

SS2 .321 .69 .134 .754 .242 .228 .340 .342

SS3 .003 .018 .85 .489 .360 .522 .436 .368

SS4 .158 .568 .239 .51 .430 .615 .608 .629

SS5 .027 .058 .130 .185 .87 .711 .568 .490

SS6 .036 .051 .272 .378 .505 .69 .871 .748

SS7 .066 .011 .190 .370 .322 .758 .68 .814

SS8 .040 .110 .130 .400 .240 .56 .662 .78

6.8 General discussion

Table 6.3 presents results from the CFA on a number of different models in order to

ascertain that the eight-factor structure model fits the data better than any other

models.

The purpose of this study has been to develop a psychometrically sound instrument

that measures the ethical principles affecting managerial decision making. The

results from this study support the initial argument that schools of moral philosophy

are multidimensional, and that using them as a single factor (category) does not fit

well with reality, as shown in Table 6.3 (Model C). Even though some results in

Table 6.4 suggest that strong correlations exist between some of the ethical sub-

scales (above .7), the results of CFA suggest that the best fit was the eight-factor

structure model. One example is the strong correlation between virtue ethics and

deontology, a situation that can be explained by the fact that both schools of moral

philosophy follow a non-consequentialist approach to ethics. In other words,

managers would not take into consideration the outcomes of an action, but they


would rather follow clearly articulated ethical principles or rely on characteristics

traits (virtues) to determine the rightness of an action.

To further explain these correlations, it is important to recall how each of the MEP

sub-scales works in action. A strong correlation (.814) exists between the two

deontological sub-scales, results that can be explained by recalling that the only

difference between them is that an act deontologist relies less on rules to grasp what

must be done in a particular situation and more on conscience, faith, and intuition,

while rule deontologists would judge actions to be right as long as they conform to

some fundamental principle or rule—the golden rule and Kant’s categorical

imperative are good examples. Neither looks at the consequences, but they take a

slightly different cognitive approach to ascertaining their respective duties. Similarly,

the two sub-scales from virtue ethics are strongly correlated (.711) as both sub-scales

start with the idea that good decisions are made by good people, that is, people who

possess virtues (wisdom). Some of those virtues would be individual character traits

that promote personal well-being (virtue of self); others would be character traits that

promote living well with others and caring for others (virtue of others).

Interestingly, the strongest correlation shown (.871) is between virtue of others (care

ethics) and act deontology, a situation that can be explained by the fact that both sub-

scales are strongly related to the extent that deciding the right thing to do is focused

on the individual in a particular context, whether it is predispositions such as

empathy or care (virtue of others), or intuitions about one’s duty in a particular

situation (act deontology). Despite that fact that these strong correlations can be

explained, the literature provides some evidence about the existence of


multidimensionality of deontology and virtue ethics (Casali, 2007; Ferrell et al.,

2008). Therefore, in order to assess if there is a further simple explanation behind

these strong results—for example, that each of the two schools of moral philosophy

is in fact one-dimensional—two further seven-factor models have been tested and the

results presented in Table 6.3. Results from the two seven-factor models suggest that

the model with the best fit is still the one with eight latent factors, confirming that a

more realistic view can be captured with the multidimensional scales. Also, there is a

strong correlation between two consequentialist sub-scales: reputational egoism and

rule utilitarianism. This correlation can be explained by recalling that this study is

about managerial decision making and, therefore, it is likely that following

organisational rules will be directly linked to protecting organisational reputation. An

interesting point is that there were no negative correlations, which means that scoring

high on one sub-scale does not necessarily decrease the opportunity to score high on

any of the others. This result can be further explained by the fact that the MEP scale

has been administered to managers, and that they were asked to assess the degree of

influence that the different items play when they make a business decision.

Managers, in accepting their positions, agree to maintain a duty of care. In order to

satisfy or discharge that duty of care, they must behave as a ‘reasonable person’

would, taking into account their position, specific skills, knowledge, and experience.

The duty of care requires them to consider the consequences of their actions and

omissions, and to ensure that those acts and omissions do not give rise to a

foreseeable risk of injury to any other person. Because of their duty of care,

managers have to consider a number of factors when making a decision; therefore, it

is expected that they would not be exclusively influenced by a particular sub-scale

but rather they would consider most of them to be of a certain import.


6.9 Conclusion

In conclusion, it should be reiterated that this study is a maiden effort to develop a

comprehensive scale to measure managerial ethical decision making. The present

study investigated the appropriateness of eight dimensions of the MEP scale for use

in the business ethics literature.

The findings of this study indicate that the eight-factor model appeared to be the best

theoretical construct, suggesting that ethical frameworks are multidimensional

(Model A eight sub-scales). Although some ethical sub-scales were highly correlated

with each other (act and role deontology sub-scales, virtue of others and virtues of

self sub-scales, and virtue of others and act deontology), these eight sub scales still

distinctly measured their own ethical constructs. This implication can be seen by

comparing the results in Table 6.3 of the eight-factor model (Model A) with the

results of the three seven-factor models (Model B1, B2, and B3—many of them were

significantly worse than Model A.

The multidimensional Model A significantly fits the data better than any other of the

models tested (Table 6.3), suggesting that managers do not necessarily subscribe to

one of the major ethical frameworks (egoism, utilitarianism, virtue ethics, or

deontology), but rather they claim to be influenced by particular dimensions within

them, such as economic egoism, reputational egoism, act utilitarianism, rule

utilitarianism, virtue of self, virtue of others, act deontology and rule deontology.

Therefore, these results support the first and third explicit assumptions in this paper.

Each ethical framework has a number of unique principles that can be

operationalised into ethical criteria for managerial decision making. The second


assumption is also supported. The different schools of moral philosophy can be

treated equally, and, in particular, the eight sub-scales can be operationalised non-

hierarchically.

It is necessary to point out some limitations to this study. Firstly, although

respectable in size, our practitioner sample was limited to health care managers in

Australia. Another limitation of this study is related to the fact that some of the MEP

sub-scales currently have only two items due to the fact that three out of the initial 24

items in the MEP scale were dropped because of a cross loading result. To begin to

address these limitations, future research should explore the reasons for this cross

loading and subsequently modify the items. Secondly, additional studies should be

carried out on the validation of the MEP sub-scales by collecting data across

different industries and countries.

Clearly, developing a new scale is not a quick and easy task; however, this paper has

shown that the MEP scale has great potential to be an appropriate instrument for

assessing the preferences of managers with regards to what they report to be the most

important ethical principles that they draw on in their decision making. The MEP

scale avoids simplistically treating the major ethical frameworks as unidimensional

and categorising managers accordingly; rather, it provides each respondent with the

opportunity to choose between a number of ethical dimensions present in the most

common ethical frameworks (ethical egoism, utilitarianism, virtue ethics, and

deontology). The MEP scale can be used to profile managers based on their ethical

preferences, providing a snapshot—at the individual, group, or organisational level—

of the way in which decision makers interpret ethical challenges. This scale can be


used in organisations at different levels for different purposes; for example, as a tool

to select people for a particular job that could required a particular ethical propensity

such as following duties (high in rule utilitarian) or empathising with others (high in

care ethics). Another possible application of the MEP scale is as a selective tool for

inclusion in a particular training programme or for the very development of training

programs based on the ethical needs of the people requiring training. Organisations

could also measure potential employees’ values during the hiring process and strive

to choose individuals who ‘fit’ within the ethical climate rather than those whose

beliefs and values differ significantly. A poor ‘fit’ can have very expensive

ramifications for both organisations and employees.


Chapter 7 The relationship between

managerial ethical profiles and individual,

organisational, and external factors

influencing the ethical decision making of

health care managers in Australia

7.1 Abstract

Whether the community is looking for scapegoats to blame, or seeking more radical

and deeper causes, health care managers are in the firing line whenever there are

woes in the health care sector. The public has a right to question whether ethics have

much influence on the everyday decision making of health care managers. This paper

reports on the findings of empirical research into the influence of ethics and other

factors on the decision making of 441 health care managers in Australia. Results

from this study indicate that health care managers in Australia draw on a range of

ethical frameworks in their everyday decision making, which, in this study, form the

basis of five corresponding MEPs: Knights, Guardian Angels, Duty Followers,

Defenders, and Chameleons.

Results from the study also indicate that the range of individual, organisational, and

external factors influencing decision making can be grouped into three major clusters

or functions. Cross-referencing these functions and other demographic data to the

MEPs provides further analytical insight into each profile’s characteristics. By

summarising existing strengths and weaknesses in managerial ethical decision


making, identifying these profiles not only can contribute to increasing

organisational knowledge and self-awareness, but also has clear implications for the

design and implementation of ethics education and training in large-scale

organisations such as health care systems.

7.2 Introduction

In the past decade, there have been a number of inquiries worldwide into the health

sector because of alleged mismanagement or individual unethical behaviours. In

Australia, the King Edward Memorial Hospital Douglas Inquiry was established

based on concerns related to the treatment of obstetrics and gynaecological cases at

the Perth-based hospital, the Royal Melbourne Hospital Inquiry was established as a

result of unprofessional behaviours, medication errors, and inappropriate treatment of

patients (Braithwaite et al., 2005; Davies, 2005; Morton, 2005). As a result of these

failures, a number of ‘scapegoats’ or ‘tip of the iceberg’ reasons were found and are

being investigated. In the initial part of the Bundaberg Hospital Commission of

Inquiry (Davies, 2005; Queensland Government, 2006), for example, a few senior

managers were identified as ‘bad apples’ and removed from their duties. However,

upon closer examination, it appears that the barrel may have been just as much a part

of the problem as the apples, a situation that has been referred to as an unhealthy

organisational culture—characterised by a lack of congruence between the

organisational values and behaviours expressed in everyday practice, and between

the shared values of the majority of staff members and the espoused values of the

organisation (Casali & Day, 2010). Whether the community is looking for scapegoats

to blame, or seeking more radical and deeper causes, health care managers are clearly

in the firing line whenever there are woes in the health care sector, and the public has


a right to question whether ethics have much influence on the everyday decision

making of health care managers.

Chapter 7 reports the findings of empirical research into the influence of ethics and

other factors on the decision making of 441 health care managers in Australia.

Foremost, it is concerned with identifying the variety of ethical frameworks

influencing managerial ethical decision making. Simply using the major schools of

moral philosophy as boxes and allocating respondents into one or the other is not the

most realistic approach (Casali, 2008a; Casali, 2008b; Casali, 2007) as each school

of moral philosophy has a number of dimensions that managers can align themselves

with. As such, ethical considerations are unlikely to influence managers in a vacuum.

The study also identifies a range of other internal and external factors and the

interplay of these with the ethical influences.

Results from this study indicate that, rather than drawing on specific ethical

traditions in their decision making, health care managers in Australia draw on a

range of ethical frameworks in their everyday decision making. This mix of

influences results in five major clusters, which, in this study, form the basis of five

corresponding MEPs: Knights, Guardian Angels, Duty Followers, Defenders and

Chameleons. Results from the study also indicate that the range of individual,

organisational and external factors influencing decision making can be grouped into

three major functions or orientations. Cross referencing these orientations to the

MEPs provides further analytical insight into the characteristics of each profile.

Summarising, as they do, existing strengths and weaknesses in managerial ethical

decision making, identifying these profiles not only can contribute to increasing


organisational knowledge and self-awareness, but also has clear implications for the

design and implementation of ethics education and training in large scale

organisations such as health care systems.

7.3 Methodology

The primary data for this study was obtained via a self-administered e-mailed

questionnaire. The questionnaires were sent to all of the members of a professional

body that agreed to participate in this study.

7.4 Instrument

The tool used for this study was the MEP questionnaire, which was designed to

capture managerial ethical preferences (Casali, 2009). In total, the MEP

questionnaire (Appendix 1) consists of 52 items (measured by a five-point Likert

Scale: 1=most important and 5=least important) covering a number of factors—

ethical, individual, organisational, and external—influencing managerial ethical

decision making. Out of those 52 items, 24 items were specifically developed to

tease out the importance of ethical factors in managerial ethical decision making, and

the remaining 28 cover the individual, organisational, and external influencing

factors. Content and construct validity were tested in relation to the items

(statements) representing the different dimensions of ethical decision making (Casali,

2009). Content validity was tested by converting the main ideas of the different

schools of moral philosophy, as expressed in the current literature, into operational

statements. With respect to content validity, 14 experts in the field of ethics,

philosophy, and theology were interviewed (Casali, 2009). These 24 items have been

divided into four sets of items, based on their affinity to one of the following schools


of moral philosophy: egoism, utilitarianism, virtue ethics, and deontology. The six

items used for each of those four categories have been further divided into two

subsets based on the major internal differences within each ethical framework

(Casali, 2009), therefore, eight ethical sub-scales have been created:

SS1 Economic egoism: represents managerial self-interest, particularly in terms

of the role that economic outcomes such as profit and cost reduction play in the

managerial decision-making process.

SS2 Reputational egoism: is a sub-scale that refers to managerial self-interest

pursued not in terms of economic outcomes, but by identifying one’s

organisation as an extension of one’s own interests. Therefore, the manager

would act to protect the organisation’s reputation, and they would protect the

organisation’s reputation, possibly even at the expense of profits.

SS3 Act utilitarianism: encompasses the idea that in order to create the greatest

overall good it is fundamental to evaluate whether the consequences of each

proposed action will create the greatest benefit for the greatest number of

stakeholders.

SS4 Rule utilitarianism expresses the same interest in the greater good, but,

instead of focusing on each separate action, it proposes to establish and follow

those rules which benefit the majority.

SS5 Self virtue: measures the degree of importance attached to individual moral

character as a determinant of good decision making.

SS6 Others virtue: as a particular framework of virtue ethics, concerns living

well with others, promoting social well-being, and would include what is referred

to as care ethics.

SS7 Act deontology: measures the degree of importance attached to doing the

right thing or fulfilling one’s duty in a particular situation. Moral rules can have

exceptions, particularly when moral duties conflict. The rightness of an act is not

determined by the ruthless application of a moral principle but by determining

what duty is demanded in the particular situation.

SS8 Rule deontology: focuses on fulfilling universal duties, such as the Golden

Rule, or acting according to universal principles (e.g. justice, not harming others,

doing good, and respecting autonomy) in all situations.


7.5 Sample characteristics

To investigate the managerial ethical preferences of health care managers in

Australia, members of an Australian health care managers’ association were

approached by e-mail to participate in the study. A link was provided to an online

questionnaire. From the association’s total membership of 2,473, a sample of 441

usable questionnaires was collected, providing a 17% response rate. Of the sample,

244 (55.3%) were female and 197 (44.7%) were male. The mean age was 44 years

(SD=.921). Almost half (43.8%) of the people in the sample were managers; 16.1%

were senior managers; 15%, corporate governance; 13.2%, supervisors; and 12%

were consultants. More than two-thirds (79.4%) of the total sample held postgraduate

degrees of some kind, and 20.6% had an undergraduate degree or less. The majority

(62.1%) of individuals in the sample worked for the government, 28.3% for the

private sector, and 9.5% for religious organisations. In terms of work experience,

31% of those sampled had 3 years or less experience, 49% had between 4 and 10

years of experience, and 20% had 11 or more years’ experience. Of the respondents,

268 (61%)—the largest group—were administrative staff, while 118 (27%) were

medical staff (doctors and nurses), and 55 (12%) were allied health staff.

7.6 Procedure

Chapter 7 applies a procedure similar to that used in the preliminary development of

the MEP scale as an instrument for investigating managerial ethical decision making;

in particular, the development of MEPs (Casali, 2008b). This previous study

gathered the data by administering the MEP questionnaire to a small sample of

academics and students (n=41) and small business managers (n=41), and then

computing the results of the 24 ethical items into the eight ethical sub-scales as


suggested by Casali (2007). Due to the small size of the sample, once the computed

results of the eight sub-scales were created, an HCA was performed to ascertain how

many clusters (MEPs) could have been developed (Casali, 2008b). Preliminary

results indicate that there were five consistent MEPs; although, with the small

business managers, only four of the five MEPs were confirmed—one cluster was

missing (Casali, 2008b). As in the previous study, the results from the 24 ethical

items of the MEP questionnaire have been computed into eight ethical sub-scales and

then clustered. However, due to the larger sample (n=441), a two-step cluster method

was used since hierarchical and K-means clustering, as used in the preliminary study,

does not scale efficiently when “n” is very large. A further limitation of the previous

study was its focus on ethical factors and the lack of analysis of individual,

organisational, and external factors that Casali (2008b) has argued are important

influences on managerial ethical decision making. Therefore, this study will analyse

the remaining 28 items related to those factors by using discriminant analysis, and

then look for significant correlations between the five MEPs (results of the two-step

cluster analysis) and the functions (results from the discriminant analysis) to further

analyse the MEPs of health care managers in Australia.

7.7 Analysis

The data collected from surveying the health care managers has been analysed in

several ways. The 24 items reflecting the ethical factors were first computed based

on the eight ethical sub-scales (Casali, 2008a), and then a two-step cluster analysis

was performed. It is well known among researchers that this clustering technique

usually leads to two clusters, that is, results that represent the most different possible

clusters. To overcome this limitation, in this study, five desired clusters were used


based on results from the previous exploratory research using the MEP scale as an

instrument to profile (Casali, 2008b). To further support the five clusters solution,

multivariate analysis (MANOVA), analysis of variance (ANOVA), and Scheffe tests

of differences in groups means were also conducted. The remaining 28 items

reflecting individual, organisational, and external factors have been analysed using

discriminant analysis.

7.8 Results

This section shows the results from the two-step cluster analysis based on the eight

ethical sub-scales (Section 7.8.1), and the results of the discriminant analysis of the

individual, organisational, and external factors and how they relate to the clusters

from the two steps cluster analysis (Section 7.8.2).

7.8.1 Two-step cluster analysis results

Results of the two-step cluster analysis performed on five desired clusters indicated

the following results, as shown in Table 7.1.

Cluster 1, which represents 28% (121) of the sample, performed as follows in

relation to the eight ethical sub-scales: 1.8 on economic egoism, 1.25 on reputational

egoism, 1.4 on act utilitarian, 1 on rule utilitarian, 1 on virtue of self, 1.25 on virtue

of others, 1.4 on act deontology, and 1.1 on rule deontology.

Cluster 2 (13% or 60 people), 2.8 on economic egoism, 2.25 on reputational egoism,

1.4 on act utilitarian, 1.15 on rule utilitarian, 1.2 on virtue of self, 1.25 on virtue of

others, 1.8 on act deontology, and 1.25 on rule deontology.


Cluster 3 (17% or 74 people): 2.1 on economic egoism, 1.6 on reputational egoism,

1.8 on act utilitarian, 1.2 on rule utilitarian, 2 on virtue of self, 1.5 on virtue of others,

1.6 on act deontology, and 1.2 on rule deontology.


2 on act utilitarian, 1.2 on rule utilitarian, 1.8 on virtue of self, 1.8 on virtue of others,

2 on act deontology, and 1.8 on rule deontology.


2.6 on act utilitarian, 1.9 on rule utilitarian, 1.9 on virtue of self, 2.2 on virtue of

others, 2.5 on act deontology, and 2.2 on rule deontology.

Manova showed that the five clusters were significantly different (F= 38.231, p <

0.001). Variations in dimensions of the ethical sub-scales among the five clusters

were gleaned from ANOVA, as summarised in Table 7.3. Scheffe tests also

highlighted the distinguishing qualities of the five managerial ethical profiles. In

reviewing the profiles of the five clusters (Table 7.1), the reader should not that

because the number and content of clusters were inseparable from the classification

criteria used, the results of ANOVA were presented only to illustrate where the

greatest differences existed among the clusters.


Table 7.1 Standardised means of the five MEPs: results of the two-step cluster, ANOVA, and Scheffe

Ethical

Sub-

Scales **

Managerial Ethical Profiles

Knight (1) 121 (28%)

Guardian Angel (2) 60 (13%)

Duty Follower

(3) 74 (17%)

Defender (4)

118 (26%)

Chameleon (5)

68 (16%)

Scheffe Results F

SS1 1.8388 2.7667 2.0777 2.2945 2.8382 1>2; 1>4; 1>5; 3>2; 3>4:

4>2; 4>5

52.085*

SS2 1.1860 2.2250 1.5811 1.6356 2.2794 1>2; 1>3; 1>4; 1>5; 3>2;

3>5; 4>2; 4>5

71.230*

SS3 1.4187 1.4167 1.6802 2.0452 2.5098 1>3; 1>4; 1>5; 2>3; 2>4;

2>5; 3>4; 3>5; 4>5

70.183*

SS4 1.0124 1.1501 1.0541 1.1525 1.7982 1>5; 2>5; 3>5; 4>5 66.533*

SS5 1.0372 2.1486 2.1486 1.9195 2.3162 1>3; 1>4; 1>5; 2>3; 2>4;

3>5; 4>3; 4>5

128.776*

SS6 1.2541 1.5034 1.5034 2.0318 2.3051 1>3; 1>4; 1>5; 2>3; 2>4;

2>5; 3>4; 3>5; 4>5

126.694*

SS7 1.4793 1.5946 1.5946 2.3432 2.5294 1>4;1>5; 2>4; 2>5; 3>4;

3>5

73.211*

SS8 1.0806 1.1655 1.1655 1.7225 2.0551 1>4; 1>5; 2>4; 2>5; 3>4;

3>5; 4>5

148.684*

** SS1 Economic Egoism, SS2 Reputational Egoism, SS3 Act Utilitarian, SS4 Rule Utilitarian, SS5 Virtue of Self, SS6 Virtue of Other, SS7 Act Deontology, and SS8 Rule Deontology *p<0.001

7.8.2 Discriminant analysis results

The importance of the discriminant function is analysed through Wilks’ Lambda.

This measures the proportion of the total variance in the discriminant scores not

explained by differences among groups. The chi-square (2) for the mentioned value

was calculated and it is possible to determine the level of significance on this basis.

Table 7.2 shows the main parameters of the nine discriminant functions. In all cases,

only one discriminant function has been estimated. It can be observed that the


discriminant functions 1, 2, and 3 are sufficiently significant, with values of p <0.05;

however, function 4 is not significant (see Table 7.2).

Table 7.2 Discriminant analysis

Discriminant functions

Function 1 Function 2 Function3 Function 4

L de Wilks .409 .714 .847 .940

Chi-square 378.694 142.738 70.394 26.049

Significance .000 .000 .046 .405

Function in group centroid

Cluster 1

Knight

-1.145 -.101 .255 -.116

Cluster 2

Guardian angel

-.192 .994 -.153 .213

Cluster 3

Duty Follower

-.040 -.237 -.664 -.195

Cluster 4

Defender

.477 -.351 .067 .328

Cluster 5

Chameleon

1.422 .171 .288 -.338

7.9 Discussion

7.9.1 Managerial ethical profiles

This section will first discuss the results of the cluster analysis in relation to the

MEPs, and subsequently correlate them with the results of the discriminant analysis

in order to enrich the profiles and their characteristics. The results from the two-step

cluster analysis confirm the existence of five MEPs. In general, both studies (small

and large samples) have found that a five-cluster structure exhibits high internal

homogeneity, which means that each individual included in a particular cluster

displays very strong similarities in terms of their ethical preferences in decision

making. At the same time, both studies have shown that each cluster exhibits a high

external heterogeneity in terms of keeping consistent, significant differences between


each cluster, and, in particular, that each cluster represents a unique mix of

preferences with respect to the eight ethical sub-scales. In developing these profiles,

a universal or strictly mathematical formula was not used, but each cluster has been

analysed individually, and inferences have been based on examination of the internal

relations between the scores from the eight sub-scales.

Figure 7.1 The Knight profile

Cluster 1 comprises the overall score for all of the eight sub-scales between 1 and 1.8

(see Figure 7.1), which in this case can be seen as a manager’s very strong

predisposition to take all of the ethical principles into consideration. A similar

combination of scores was found in a previous study and the cluster was called the

Knight profile (Casali, 2008b). These managers consistently rate all of the eight

ethical sub-scales highly, endeavour to maximise theirs and their organisation’s

values, keep economic factors in the picture, and consider the impact of decisions on

all stakeholders (Casali, 2008b). Managers who exhibit this profile are ethical

pluralists, and they will take into consideration all of the individual moral principles

by putting them into a global scenario (Casali, 2008b). A possible downside of being

the only profile representing ethical pluralism is that the knight might have too high


an expectation about their leaders’ and their organisation’s espoused values and

therefore can be easily disappointed (Minkes, Small, & Chatterjee, 1999).

Figure 7.2 The Guardian Angel profile

Overall, Cluster 2 shows less focus on those sub-scales that are directly related to the

organisation (See Figure 7.2), such as economic and reputational issues (computed

means 2.8 and 2.25), but display a strong emphasis on the other six sub-scales

(computed means between 1.2 and 1.8). A cluster with this result can be called

Guardian Angels—managers who not only make sure that they conform to rules, but

who ensure that the dignity of others is maintained by also keeping an eye on the

outcomes (Casali, 2008b). Guardian angels are strongly committed to fulfilling the

obligations that go with a public or professional role and, therefore, they feel a duty

to consider the consequences of their decisions and to treat others fairly. They obey

rules but at the same time they use their wisdom to consider the impact on others of

so doing. A risk with this profile is that the potential conflict between the Guardian

Angel’s strong commitment to duty and their concern for others may lead to

inconsistent responses, and also to costly outcomes due to low influence of economic

factors.


Figure 7.3 The Duty Follower profile

To some extent, Cluster 3, looks similar to the Guardian Angel, as they also score

lower on the first two sub-scales and higher on the rest; however, this cluster is

characterised by three very strong sub-scales; rule utilitarian, others virtue (care

ethics) and rule deontology (see Figure 7.3). In the preliminary study, similar scores

were exhibited by the profile called the Duty Follower. It is characterised by a strong

belief that rules and duties are the most important factors in managerial ethical

decision making (Casali, 2008b). Managers with this profile are usually focused

more on doing the right thing, rather than the consequences. They tend to have a

more absolutistic view of morality, and they are very strong advocates of universal

duties such as not lying to or harming others. Those exhibiting this profile have high

moral standards in terms of fairness and justice. However, the risk is that Guardian

Angels will achieve this at the expense of efficiency or flexibility due to the low

influence of economic and reputational factors (Casali, 2008b).


Figure 7.4 The Defender profile

Cluster 4, on the other hand is characterised by two main sub-scales: rule utilitarian

and reputational egoism (see Figure 7.4). This profile has been named the Defender.

Managers in this cluster are very loyal to the organisation and will vigorously protect

its reputation (Casali, 2008b). Honour and reputation are important at both the

personal and organisational levels, and maintaining a good opinion about oneself and

one’s organisation can be more important than the bottom line. The Defender would

spend more time weighing up what is good versus what is good for the organisation.

These individuals are extremely important for and organisation because they are the

most loyal and are less likely to undermine its goals by pursuing either self-interest

or the interest of those outside the company (Casali, 2008b). However, the excessive

loyalty of the Defender is not always helpful. There is a significant risk that they

might be willing to engage in illegal or unethical actions in the name of enhancing or

protecting the organisation’s reputation. Like a defender in a soccer team, they would

accept the penalty of taking down an opponent in front of goal and perhaps even risk

a personal send off, for the good of the team. A recent corporate example would be

the behaviour of some employees of the Australian Wheat Board. Its former


chairman, when accused of bribe and breaching a number of UN oil-for-food

sanctions, said in a statement issued by his lawyers: ‘I emphatically deny that I acted

in any manner other than in the best interest of AWB and its shareholders.’

(McMahon, 2007).

Figure 7.5 The Chameleon profile

In one way, those in Cluster 5 are similar to the Knights; their individual scores for

each of the eight sub-scales are evenly distributed. However, the overall scores are

lower than those of the Knights (see Figure 7.5). This profile has been dubbed the

Chameleon. Just like the reptile adapts its skin colour to fit in with its surrounds,

these managers draw on each different ethical framework, deciding which is the most

appropriate for a particular situation (Casali, 2008b). Arguably, the Chameleons have

a realistic view of morality; they do not rigidly hold a particular position but assess

the context first and then apply the ethical framework that is most appropriate to that

particular situation. While this profile is more flexible than the Duty Follower, there

is also a risk that all of this flexibility could simply encourage decision makers to

blend in with the prevailing culture (‘when in Rome, do as the Romans do’) rather

than engaging with it proactively (Casali, 2008b). At best they might be weak

pluralists; at worst, they are moral relativists.


7.9.2 Managerial ethical orientations

From the results of the discriminant analysis, only three of the four functions were

significant; that is, only the first three functions can help to discriminate between the

five MEPs (see Table 7.1). Function 1 is the biggest out of the three, with 15 items

out of the 26 analysed, varying from emphasising the importance of organisational

codes of ethics to personal values, and from accounting for the environment to being

guided by self-experience and professional experience. Due to both the large number

of influences that are correlated to this function, and to their range—some are

directly related to the individual, others to the organisation and to external factors—

this function could be seen as promoting a universal orientation in decision making

by significantly taking into consideration a large number of stakeholders and

competing values. It can be contrasted against Function 2, where the influences are

more narrowly restricted to external factors such as mission statements, competition

with other organisations, or purely economic goals. In this function, managerial

ethical decision making aligns externally with the mission statement of the

organisation, attaining good economic outcomes, and creating or maintaining a

competitive advantage. Function 3 has two out of three items that are negatively

correlated to it: decision making by personal judgment and pre-conventional

Kohlberg cognitive moral development stage, and one item that is positively

correlated to other professional experience. Therefore, this function summarises a

role-model orientation in managerial ethical decision making: a tendency to be more

influenced by concrete others. Rather than individual managers strongly relying on

their own capabilities, knowledge, and values, decision-makers functioning in this

way are strongly affected by role models or what experts have to say.


To further the analysis of the MEP scale in the health care sector in Australia, it is

important to assess the relationship between the five MEPs and the three functions

(Table 7.2). As expected, Function 1, which promotes universality and stakeholder

approach to managerial ethical decision making, is strongly correlated to the Knight

profile and uncorrelated to the Chameleon profile. The other three profiles are

somewhere in the middle between the two extremes (Knight and Chameleon). Once

again, as expected, Function 2, which relies heavily on the mission statement and

economic competition, is positively correlated to the Defender profile and to some

extent to the Duty Follower, but is weakly correlated to the Knight and Chameleon

profiles, and negatively correlated to the Guardian Angel profile. With respect to

Function 3, the Duty Followers are the most positively influenced by experts or

referent people in their decision-making process, while the least affected are equally

Knights and Chameleons.

7.10 Conclusion

As previously discussed, individual preferences with respect to ethical frameworks

are not easy to identify, especially if one rejects the a priori assumption that

respondents have a preference for only one ethical approach. A measurement

instrument is needed that reflects the multidimensional nature of respondents’

preferences, that is, their perceptions that a number of ethical frameworks may be

important to managerial ethical decision making. As described in this chapter, this

element has been well captured by using the MEP scale. First, using the instrument,

the existence of five prominent managerial ethical profiles (Knights, Duty Followers,

Guardian Angels, Defenders, and Chameleons) has been ascertained and confirmed,

and their distinctive features, including their relative strengths and weaknesses, have


been described. Second, the current understanding of the MEP scale has been

furthered by examining the correlation between these MEPs and a number of

individual, organisational and external factors influencing decision making in the

health care sector in Australia. In relation to the first purpose, this study has

confirmed the existence of five MEPs with similar characteristics to those identified

in previous research (Casali, 2008b). Second, the current research has identified the

particular pattern of these profiles among a significant sample of the health care

managers in Australia. It is interesting to note, for example, that the profile of one

out of two Australian health care managers surveyed is either a Knight or a Defender

(aggregate 49%). Both Knights and Defenders are highly focused on maximising

outcomes for the good for the organisation, though it could be said that the Knights

tend to do this with an eye on the interests of the community as a whole, while the

Defenders are more likely to treat the reputation of their organisation as an extension

of their own. The prominence of Knights can be partly explained by the fact that a

larger number of Knights in the sample were managers in the private sector. The

Knights’ cohort also contained a significantly higher number of managers with 11

years or more of professional experience in their current role, which counted for 20%

of the total sample (89 managers). Given that managers with the Chameleon profile

tended to be the least experienced, it can reasonably be inferred that strong

commitment to using a variety of ethical frameworks in managerial ethical decision

making (strong pluralism) is a product of accumulated experience and reflection and

that the flexibility of the Chameleon profile reflects a weak pluralism or ethical

relativism derived from a lack of experience or a desire to please and conform.


Chapter 7 aimed to measure and profile the multidimensional influence of ethical

frameworks on managerial decision makers in the Australian health care sector,

while noting at the same time a range of other factors—individual, organisational,

and external—also influencing their decision making. The confirmation of a stable

set of profiles across two studies suggests some useful outcomes for both practice

and research. There is obvious practical potential for the thoughtful use of the MEP

scale as an instrument to help managers increase awareness of their own managerial

ethical profile. The MEP scale can also help an organisation to assess its ethical

strengths and weaknesses, based on the relative strength of the different profiles

within the organisation.


Chapter 8 Conclusion

8.1 Introduction

Incidents like that involving Dr Jayant Patel at the Bundaberg Base Hospital have

increased the degree of public scrutiny on the health care industry in Australia.

Managers deal with ethical issues all the time; however, in the case of health care

managers, a mismanaged situation can adversely affect patients and their families,

employees and their families, and the wider community. In Australia, despite the fact

that in most cases codes of ethics, strong espoused organisational values, and also

strong individual staff values are in place, mismanagement of ethical issues still

occurs (Casali & Day, 2010). Increasing the ethical decision-making capacity of

managers remains at the forefront of addressing this situation. This thesis has used

profiling techniques based on an analysis of the factors influencing ethical decision

making to unlock the black box of managerial ethical decision making of health care

managers in Australia. These managerial profiles can be used to increase individual

and organisational knowledge about the diverse range of ethical decision-making

styles of managers in an organisation and to adjust organisational practice

accordingly.

8.2 Key findings

Based on the factors (ethical, individual, organisational, and external) influencing

their decision making, the ethical outlook of Australian health care managers can by

summarised according to five MEPs: Knight, Duty Follower, Guardian Angel,


Defender, and the Chameleon (Table 8.1). The five profiles differ primarily in the

degree to which respondents’ decision-making process is influenced by the ethical,

individual, organisational, and external factors.

Table 8.1 MEPs and related scores on ethical sub-scales of health care managers in Australia.

Up arrow=high influence; down arrow= low influence; horizontal arrow= moderate influence

The first MEP is the Knight (n=121), which is strongly influenced by all of the

different ethical principles: a result that is in line with an ethical position known as

ethical pluralism (Hinman, 2007). In contrast to the Knight, the Chameleon profile

(n=68) is characterised by the overall low influence of the different ethical principles.

This profile can be seen as an example of ethical relativism due to the fact that

managers are equally weakly influenced by all of the ethical principles. This is a

potential indication that they do not hold any particular ethical principle to be

superior to another, and that they switch between them as they see it fit or based on

Knight Guardian Angel

Duty follower

Defender Chameleon

Economic Egoism

Reputational Egoism

Act Utilitarian

Rule Utilitarian

Self Virtues

Others Virtues

Act Deontology

Rule Deontology


the circumstances (Hinman, 2007). The last three profiles better represent ethical

absolutism as they hold some principles to be much higher than others. It is

important to distinguish between ethical relativism and ethical absolutism. For

absolutists, many things that are different from their values are wrong; however, for

relativists, nothing is wrong but simply different (Taft & White, 2007). The

difference between these three profiles is the ethical principles that are deemed to be

the most important. The Duty Follower profile (n=74) upholds rule deontology,

others virtue (care ethics), and rule utilitarianism as the most important principles

when making a decision, and are less concerned with economic and reputational

values. This particular combination of ethical principles suggests that managers with

this profile follow duties, regulations, and procedures, perhaps because they think

that this is the best way to care and protect others. The Guardian Angel profile

(n=60), on the other hand, seems to be equally influenced by the ethics of duty

(deontology) and by the ethics of virtues (virtue ethics), but at the same time follows

those rules that can benefit the majority. Finally, the Defender profile (n=118)

supports the idea that acting or following more universal rules is extremely

important, but protecting the organisational reputation is paramount.

In order to further explain the five MEPs, the other influencing factors—individual,

organisational, and external—were then analysed by using discriminant function

analysis (Chapter 7). The results of the discriminant function analysis on the items

(28 overall) that relate to these three factors (Appendix 1) yielded three statistically

significant functions able to discriminate between the five MEPs. Function is a

technical term commonly used when referring to the results of a discriminant

function analysis, but in this study they describe either a general inclination to be


more or less oriented towards the different influencing factors. We will, therefore,

refer to them as orientations.

The first orientation has been named the universal orientation. It promotes a

universal perspective in decision making by taking into consideration a large number

of factors (16 out of 28 items) influencing ethical decision making, drawn from each

of the three categories of influencing factors (individual, organisational, and

external). This orientation can be explained as the manager’s propensity to take into

consideration a number of stakeholders. They understand that responsible

management is a social-relational and ethical phenomenon that occurs in social

processes of interaction (Maak & Pless, 2006, p. 99). The second orientation has

been named the external orientation. It emphasises the importance that being in line

with the mission statement of the organisation, attaining good economical outcomes,

and creating or maintaining a competitive advantage has in managerial decision-

making processes.

The third orientation has been named the role model orientation due to the fact that it

summarises a tendency to be guided by expert or referent others rather than one’s

own instincts. Table 8.2 shows the correlation between the five MEPs and the three

orientations. It is possible to see that the strength of correlation between the three

orientations and each of the MEPs has been represented by the size of the semicircle

on each side of the triangles shown below.


Table 8.2 Correlation between the five managerial ethical profiles and the three orientations

Knight Guardian Angel

Duty Follower

Defender Chameleon

Universal Orientation

High Moderate Moderate Low Low

External orientation

Moderate Low Moderate Moderate/high Low

Role model Orientation

Low Moderate High Moderate Low

The Knight profile correlates most with the universal orientation, as it promotes

universality and a stakeholder approach to managerial

decision making; is very least correlated with the role

model orientation; and is only moderately correlated

with external orientation. This pattern of correlation

between the Knight and the three different orientations

can be explained by reiterating the fact that managers in

this profile have scored very high on all of the eight sub-scales, suggesting that they

would not only give high regard to all of the ethical principles but that they would

take a large number of the other influencing factors into consideration as well. Based

on this definition of the Knight, it is possible to argue that they would not simply

make a decision based only on the opinion of a leader or an expert (role model

orientation); they would take a more holistic view of the situation.

The Guardian Angel, on the other hand, is moderately

influenced by both universal and role model orientations and

least influenced by the external orientation. This pattern of

correlation between the three orientations and the Guardian

Angel profile, in addition to what is already known of ethical

Figure 8.1 Knight orientation

Figure 8.2 Guardian Angel orientation


preferences, suggests that managers in this profile are strongly influenced by rules

and duties that promote fairness, equality, and respecting the dignity of others.

The Duty Follower profile is highly correlated to the role

model orientation and only moderately to the other two.

This information would confirm the fact that the managers

in this profile are looking for guidelines and clearly

established principles when making a decision, both from

written and formal rules or from the experts. It has been suggested that adhering to

experts’ or leaders’ instructions and organisational regulations can be seen as a

strategy to ‘play on the safe side’ or ‘work by the book’ (Kark & Dijk, 2007, p. 517).

Therefore, it is not surprising that this profile is the highest correlated to the role

model orientation.

The Defender profile is correlated highly to external

orientation, moderately to role model orientation, and least

to universal orientation. It has already being argued that

this profile is strongly influenced by factors that are

closely related to protecting organisational reputation. It

has also been argued that there is a strong relationship between organisational

reputation and performance (Ang & Wight, 2009). In addition, managers in this

profile are strongly influenced by external factors such as competition, economics,

and following the mission statement, because these factors have a direct link to

organisational reputation. Therefore, being a leader in a particular industry suggests

Figure 8.3 Duty Follower orientation

Figure 8.4 Defender orientation


that a particular firm has developed a competitive advantage against its competitors,

a position that certainly would improve its organisational reputation. Moreover, the

aim of a mission statement is to introduce and promote the organisation to the public.

Therefore any gap between the values and behaviours promoted by the mission

statement and the practice of that particular firm could most certainly foster a bad

public opinion about that firm or low organisational reputation.

The Chameleon profile was not strongly influenced by any of the ethical

frameworks. This profile also shows low correlation with each

of the three orientations, confirming the idea that managers in

this profile have not yet committed themselves to a particular

ethical practice, that they are adaptable.

Two principal conclusions can be drawn from the results of this study. Firstly, the

five MEPs summarise a large number of ethical, individual, organisational, and

external factors that influence health care managers in Australia. The use of these

profiles can potentially simplify the analysis of both practical and theoretical

organisational issues concerning ethics and make it easier to focus on key aspects.

Secondly, Australian health care managers are characterised by the two most

prominent MEPs: the Knight (26%) and the Defender (23%), which may

significantly influence the overall behaviour of the sector—conditioning the

responses of health care workers to issues with important ethical components.

Figure 8.5 The Chameleon profile


8.3 Significance and practical application

This research has developed MEPs based on reliable and valid measures of factors

influencing ethical decision making in the health care context in Australia. These

MEPs were conceptualised based on three streams of literature—factors influencing

ethical decision making, current tools to measure ethical decision making, and

profiling techniques. This research contributes to the current knowledge in these

three areas and also has practical implications for health care managers and their

organisations.

8.3.1 Contribution to the current knowledge of factors influencing ethical decision making.

This thesis has developed an evidence-based taxonomy grounded in a critical

analysis of more than 40 years of research in this area (Chapter 3), which has

established four categories based on the nature of the influencing factors: ethical,

individual, organisational, and external. This is the first time that a large number of

factors influencing ethical decision making have been collected and presented as a

framework to be used as a basis for future research. The significant contribution of

this study is based on applying the evidence-based taxonomy to the concept of

profiling managers. As a result, this study broadens the ethical decision-making

concept to investigate the degree of influence that a large number of important

factors have on health care managers in Australia.


8.3.2 Contribution to the current knowledge of tools that measure ethical decision making in organisations

Tools that are currently used extensively to measure ethical decision making are the

Defining Issue Test (DIT) by Rest et al. (1997), the Managerial Judgment Test (MJT)

by Lind (1978), and the Managerial Value Profile by Sashkin et al. (1997). All of

these tools assume that the schools of moral philosophy are unidimensional

constructs and that people belong to only one of them. For example, the Managerial

Value Profile by Sashkin et al. (1997) allocates respondents to one of three schools

of moral philosophy: utilitarianism, individual rights (deontology), and social justice

(Zgheib, 2005). This thesis has shown that schools of moral philosophy are

multidimensional in nature, and that people are influenced by them in different ways.

The MEP scale has provided empirical evidence that using sub-scales of the main

schools of moral philosophy (ethical egoism, utilitarianism, virtue ethics, and

deontology) provides a better description of the differences in ethical styles of

managers (Chapter 6).

8.3.3 Contribution to the current knowledge of profiling in business

Profiling techniques have being extensively used in business to help organisations on

a number of different occasions and for various purposes. For example, profiling

techniques have been used to profile consumers based on different characteristics

such as their decision-making styles (Sproles & Kendall, 2005), their level of need

for information retrieval (Fan, Gordon, & Pathak, 2006), and their motivation when

purchasing via online auctions (Hou & Elliot, 2010). However, this is the first time

that profiling techniques have been used in conjunction with factors influencing

ethical decision making to investigate health care managers. Five significant profiles


have been identified as a result of using profiling techniques and the proposed

evidence-based taxonomy of factors influencing ethical decision making (Chapter 3).

This research has practical implications not only for health care organisations but for

a wide range of organisations. It is applicable in a number of areas such as

supporting effective ethics programs, improving recruitment and training, and

building team effectiveness based on the knowledge of managerial ethical decision

making that is supported in this thesis.

Finigan and Theriault (2006) have suggested that the effectiveness of ethics

programs (code of ethics and ethical training) are instrumental to personal value

systems and the way that those codes have been interpreted and applied when facing

ethical dilemmas. Managerial ethical profiles can increase the success of ethical

regimes, such as codes of ethics or codes of conducts, by identifying and grouping

employees that share a particular MEP, and tailoring ethics training and internal

communication in ways that will build on the existing strengths of the various ethical

profiles. For example, if the number of Duty Followers in an organisation is

significant higher than any other profiles, then that organisation will need to make

sure that managers and experts are good ambassadors of the organisation’s espoused

values in order to provide staff with good role models to imitate and follow.

Therefore, in this particular case, the organisation should identify the people that are

recognised as role models within the organisation and train them on the mission

statement, vision, espoused values, and policies and procedures.


Organisations can use the MEP scale as a recruitment tool to support managers to

choose the right person for the job. The health care industry, for example, is facing a

great challenge in recruiting and retaining staff due to the current skills shortage

(Collins, 2007). Therefore, employing the right person and retaining them is vital in

this industry. Laabs (1999) referred to ‘personality fit’ as the degree of fit between

the candidate and the organisation. It has been suggested that to better understand a

job candidate, and, more importantly, their fit with the organisation, depends on the

degree of knowledge that an organisation has on what the person has done (résumé)

and who the person is (Laabs, 1999). A number of behavioural tests have been used

in recruitment for many years, but the MEP scale has a unique capacity to uncover

the MEPs of candidates. Despite the fact that this study suggests that all five MEPs

are equally valid, they could be strategically allocated within the different levels and

areas of an organisation. In a more specific area, the MEP scale can be used as a

valuable instrument to create a diverse and well-balanced board of management. A

strategically recruited group of directors is paramount for a good performance of any

board (Shultz, 2003). There is evidence that supporting diversity in boards of

directors can positively impact the breadth of perspective and the degree of

innovation in making decisions (Van Der Walt, Ingley, Shergill, & Townsend, 2006).

Therefore, making sure that board members are not only chosen for their skills and

technical knowledge, but also based on their MEPs can positively affect the way that

boards make decisions.

The MEP scale developed in this research can be used to better understand individual

managers and build strategies to improve their ethical decision-making capabilities.

Training can be tailored around these five profiles. For example, Duty Follower


managers might require training that provides strong reference to laws, codes,

regulations, and procedures, while Defender managers might need to see the link

between their skills and the benefit for the organisation’s reputation. Also, the MEP

scale can be used to develop role-play exercises to show how people would approach

decision making according to their profiles and other influencing factors. In this case,

it would be extremely beneficial for managers to see, first hand, snapshots of

common situations in business—such as applying a code of ethics to a particular

situation—and to learn how people would react based on whether they were

Chameleons, Defenders, Duty Followers, Guardians, or Knights.

8.4 Limitations of the study and directions for future research

While the MEPs developed in this study have suggested useful and significant

insights into factors that influence health care managers in Australia, further research

is required to overcome a number of limitations in at least three main areas: (a)

continuing development and refinement of the MEP scale, (b) exploring the extent to

which the MEPs can be applied, both to organisations beyond the health care sector

and in different countries, and (c) examining the relationship between an

organisation’s ethical position and that of the outside community.

8.4.1 Continuing development and refinement of the MEP scale

Although this thesis has provided empirical evidence about the eight ethical sub-

scales of the MEP scale by using confirmatory factors analysis (Chapter 6), there is

room for improvement. Some of the MEP sub-scales currently have only two items

due to the fact that 3 out of the initial 24 items in the MEP scale were dropped


because of cross loading results (Chapter 6). To begin to address this limitation,

future research could explore the reasons for this cross loading and consequently

modify these items (DeVellis, 2003). In addition to modifying these three items,

more items might be developed to strengthen the other sub-scales.

8.4.2 Exploring the extent to which the MEPs can be applied

The MEP scale has been tested only on health care managers (Chapter 7). In order to

further validate the five profiles that have been discovered and discussed in this

thesis, it will be necessary to administer the MEP scale in different industries and in

different countries and see if the five MEPs are universal or if they are a more

contextual (industry-based).

In particular, the relationship between the orientations and the MEPs remains

untested beyond the health care sample used for the main study. Further exploration

of relationships between the MEPs and the orientations could be based on

investigating possible links between the results of the self-reported data (MEPs and

orientations) and actual behaviours of managers. Like the Myers-Briggs Personality

profiles, MEPs could be tested in relation to a team’s effectiveness by considering

the information of each team member’s MEP (Varsel, Adams, Pridie, & Ruiz Ulloa,

2004). The MEP scale could be administered to each member of different teams in

order to ascertain their individual MEP. Each team could then be asked to perform a

particular task or project before using the Team Effectiveness Questionnaire (TEQ)

to see if there is any particular correlation to the mix of profiles and team

effectiveness (Varsel, Adams, Pridie, & Ruiz Ulloa, 2004). Perhaps one way to move

forward might be to start with health care managers as the MEPs have been created


and validated in this particular industry and are therefore able to create more

significant and valid results.

8.4.3 Examining the relationship between an organisation’s ethical position and that of the outside community

Finally, more study is required of the relationship between the MEPs within an

organisation and those of the community. For example, a Defender profile may be

counterproductive if the community regards the activities of the organisation as

ethically indefensible. When an organisation is in this position, it is important that

there be diversity at the board level because independent board members may be able

to override self-destructive herd instincts among insiders whose team mentality is

overdeveloped. Toyota, for instance, could have avoided a considerable amount of

embarrassment recently if it had not attempted to shift the blame for faulty

acceleration mechanisms to other manufacturers and drivers, and had instead

admitted that it had been using an inappropriate design.

If these future lines of enquiry refine the MEP scale and continue to confirm its

validity, then it will be a very useful tool for unlocking the black box of managerial

ethical decision making. With increased self-awareness and more insightful

management of the ethical strengths and weakness within organisations, the

disruptive consequences of unethical behaviour in corporate life are likely to be less

tragic than they have been in the recent past.

In conclusion, the findings of this research highlight an area of growing concern to

health care organisations, government, and society. Managerial ethics, especially in

health care, are of concern to both current and future administrators. The ethical


issues of health care administration are likely to attract increased attention because of

the growing concern regarding the ethical and economic dimensions of

administration and decision making. Further research in this area would shed new

light on these growing concerns.


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Appendices

Appendix 1 MEP Questionnaire

When fulfilling the requirements of your position in your organisation, please indicate the importance of the followings in your decision-making process

1 providing the highest economic return (profit) for the organisation

Extremely important

Very important

Fairly important

Not very important

Not important at all

2 minimising costs for the organisation

Extremely important

Very important

Fairly important

Not very important


3 protecting the reputation of the organisation

Extremely important

Very important

Fairly important

Not very important


4 optimising resources of the district/hospital/unit/dept

Extremely important

Very important

Fairly important

Not very important


5 attaining organisational yearly budgets (short term)

Extremely important

Very important

Fairly important

Not very important


6 being in line with the organisational mission

Extremely important

Very important

Fairly important

Not very important


7 generating the greatest overall benefits for the district/hospital

Extremely important

Very important

Fairly important

Not very important


8 not harming the clients/patients

Extremely important

Very important

Fairly important

Not very important


9 respecting organisational’ rules and regulations that have been created for the greatest benefit for all stakeholders

Extremely important

Very important

Fairly important

Not very important


10

obeying the law (state and federal)

Extremely important

Very important

Fairly important

Not very important


11

creating the greatest overall benefit for the local community

Extremely important

Very important

Fairly important

Not very important



12

creating the greatest overall benefit for the wider community

Extremely important

Very important

Fairly important

Not very important


13

being most in line with your core personal values

Extremely important

Very important

Fairly important

Not very important


14

being most in line with the person you want to be

Extremely important

Very important

Fairly important

Not very important


15

respecting dignity of those affected by the decision

Extremely important

Very important

Fairly important

Not very important


16

being able to empathise with clients

Extremely important

Very important

Fairly important

Not very important


17

acting openly when making decision

Extremely important

Very important

Fairly important

Not very important


18

making “care for the sick” paramount in determining decision alternatives

Extremely important

Very important

Fairly important

Not very important


19

giving the opportunity to all affected parties or their representatives to have input into the decision making process

Extremely important

Very important

Fairly important

Not very important


20

treating others as you want others to treat you

Extremely important

Very important

Fairly important

Not very important


21

treat people as ends not as means Extremely important

Very important

Fairly important

Not very important


22

ensuring that confidentiality is maintained at all times

Extremely important

Very important

Fairly important

Not very important


23

maintaining a fair process at all times

Extremely important

Very important

Fairly important

Not very important


24

ensuring that the organisation “duty of care” is maintained at all times

Extremely important

Very important

Fairly important

Not very important


Please rate the following factors in terms of their influence on your decision making process

Individual factors


1 receiving rewards or minimising punishment to yourself (Kohlberg pre conventional)

Extremely Influential

Very Influential

Influential

Not Too Influential

Not Influential At All

2 fulfilling expectation of your colleagues and boss (Kohlberg conventional)


Very Influential

Influential

Not Too Influential


3 following your personal moral values regardless of other people’s opinions (Kohlberg post conventional


Very Influential

Influential

Not Too Influential


4 making a decision independently, and using the information available to you at the time (Vroom DM AI)


Very Influential

Influential

Not Too Influential


5 making the decision independently but getting more information from collaborators (Vroom DM AII)


Very Influential

Influential

Not Too Influential


6 making a decision independently but asking for tokenistic consultation from subordinates (Vroom DM CI)


Very Influential

Influential

Not Too Influential


7 making a decision independently and only informing subordinates (Vroom DM CII)


Very Influential

Influential

Not Too Influential


8 making a decision collaboratively through facilitation and engagement of subordinates (Vroom DM GI)


Very Influential

Influential

Not Too Influential


9 relying heavily on your personal values in making decisions (Personal values)


Very Influential

Influential

Not Too Influential


10

being guided by your professional experience (professional experience)


Very Influential

Influential

Not Too Influential


11

being guided by experts in their fields (professional experience)


Very Influential

Influential

Not Too Influential


Organisational factors

12

being in line with the hospital/district code of ethics/conduct (code of ethics)


Very Influential

Influential

Not Too Influential


13

following ethical principles learnt during training provided by the organisation or from formal studies (ethical training)


Very Influential

Influential

Not Too Influential


14

following ethical principles that you have learnt during your formal studies (ethical training)

Extremely Influenti

Very Influential

Influential

Not Too Influential

Not Influential At


al All

15

following ethical principles that you have learnt in a previous organisation (ethical training)


Very Influential

Influential

Not Too Influential


16

being in line with the organisational culture (organisational culture)


Very Influential

Influential

Not Too Influential


17

reaching a decision based by using evidence-based process (decision making process)


Very Influential

Influential

Not Too Influential


18

reaching a decision by bargaining with superiors and subordinates (decision making process)


Very Influential

Influential

Not Too Influential


19

reaching a decision by inspiring others (decision making process)


Very Influential

Influential

Not Too Influential


20

reaching a decision by using personal judgment (decision making process)


Very Influential

Influential

Not Too Influential


21

being in line with the mission statement of the company (mission statement)


Very Influential

Influential

Not Too Influential


22

respecting your professional code of conduct (professional code of conduct)


Very Influential

Influential

Not Too Influential



External factors

23

political agendas compared to medical needs (Political)

extremely influential

very influential

influential

Not too influential

Not influential at all

24

fulfilling macro economic factors (Government budgets) (Economic)


very influential

influential

Not too influential


25

covering existing health gaps in the community needs (social)


very influential

influential

Not too influential


26

encouraging the technological advancement in terms of hardware and software where given high preference (technological)


very influential

influential

Not too influential


27

promoting environment protection such as reduction of chemical waste and energy savings (environmental)


very influential

influential

Not too influential


28

identify particular gaps between the community health needs, and the current level of satisfaction of those needs by competitors (competition)


very influential

influential

Not too influential


ethical decision making and health care managers...

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