the ethics of business

7/28/2019 The ethics of business

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The Ethics of Business:Improving or Deteriorating?Gene R, Laczniak, Marvin W. Berkowitz, Russell G. Brooker, and J ames P. Hale

The on@ thing that corporutions seem tobe interested in is making monq.

(An American consumer,1992 Gallup Survey)There are a lot ofpeople in top manage-ment uv?o have created credos and otherstandards uhich encourage theirmanagers to put thepublic ahead of thebottom line. (A corporate CEO,

1992 Gallup Survey)I teems the U.S. public is far more pessimisticabout the ethical c limate of business thesedays than are members of top management.This chasm of perceptions may partly explain theheated debate about corporate ethics that regu-larly occurs in the media and public policy fo-rums. Although CEOs and the public may agreeabout the unfortunate nature of specific businessscandals-such as the fiscal irresponsibilityshown by many S&L managers or the outrightgreed exhibited by Wall Street insider traders-chief executives tend to view such behavior asthe exception, whereas the public appears toconsider it ~the rule.

In the pages that follow, this analysis will:l demarcate some of the major differences inthe perceptions of the general public and CEOs

concerning issues in business ethics;l sketch some of the areas in which there isstrong agreement concerning business ethics

issues among these groups;l discuss the possible causes of the existingcross-perceptions among consumers and business

executives, along with the costs to corporationsthat such perceptions entail; and

l suggest what U.S. firms need to do to alle-viate these differing perceptions.

The Role of Surveysand Polls in JudgingBusiness EthicsPublic opinion pollsand surveys of manag-ers are one way oftapping into the atti-tudes and values indi-viduals hold concern-ing the appropriate-ness of the economicactions being taken insociety. By under-standing values, soci-ety comes to knowthe principles thatdefine acceptablebehavior. These valuesconstantly shift, albeit

Why do CEOs fend toperceive the efhiculperformance of U.S.business so differentlyfrom Americanconsumers? A recentopinion poll exploresand evduafes theimplications of thesecross-percepfions,

slowly, and any changes need to be monitored.For example, the attitudes of business regardingthe physical environment that were prevalent inthe 1950sare certainly not appropriate now.

Surveys of business executives concerningtheir perceptions of their ethical responsibilitieshave been one pragmatic method of tracking thepropriety of business actions. One of the classicpieces of business ethics research involved asurvey of executives conducted by Rev. RaymondBaumhart (1961). Among the findings of thisresearch and its subsequent replications and ex-tensions was the conclusion that executive re-spondents to such surveys typically consideredthemselves more ethical than the average man-ager, and that although ethical problems existedin business, management behavior was becomingmore ethical (Brenner and Molander 1977). Thus,there is a history to support the position thatbusiness leaders are upbeat about their behavior.


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Meanwhile, public opinion polls on businessbehaviors (and most any other topic) are com-monplace and do not portray the szzme ethicalpropriety managers imply. For example, ;I 1985Neul York 7inzes poll found that 55 percent of theAmerican public feel that LJ.S.orporate execu-tives are not honest (Williams 1985). Similarly, a1987 poll sponsored by Time magazine found that76 percent of the American public saw a lack ofethics in business people as ;I factor contributingto the decline of U.S. moral standards (Bowen1987). Other public opinion polls have regularlyquestioned the moral propriety of most businessmanagers. To the extent that corporate executivesand the general public disagree about the ethicalperformance of business, a fundamental tensionhas been created. This article reports on onerecent poll that clearly highlights the nature ofthat tension. It then deals with the implications ofthese disparate views.The Study and the MethodThe information contained in this report is basedon a national probability telephone poll of 1,053dult U.S. consumers and a quota sample of 100CEOs of large companies, using a comparablebattery of questions. The poll was conducted bythe Gallup Organization, Inc. and was supportedand sponsored by the SOCAP (Society of Con-sumer Affairs Professionals) Foundation. The datadiscussed in this article represent one part of alarger study that also polled 50 consumer aclvo-cates and government regulators regarding theirviews on business ethics. Given the nature of thesamples, the findings of this survey are project-able to the population of the respondent groups.The findings of the survey are based on a 75-item questionnaire that is similar for each sur-veyed group (consumers, CEOs, and regulators)but adjusted for respondent category and various

demographic information. The initial draft of ttelephone survey instrument was developed bGallup, Inc. based on 40 in-depth personal intviews with CEOs, consumer advocates, and coporate employees. It was refined ;md revised SOCAP staff and two fellows of the Center forEthics Studies (CES) at Marquette Ilniversity. Iwas then pretested with 39 full-length interviewconducted by Gallup and further extensivelyrevised by the CES fellows. The basic data setwas input and recorded by Gallup, Inc. :mcI futher analyzed at the CES.Points of Contrast Between CEOsand Consumers

Table 1Factors Considered To Be A Strong Influence On Ethical Behavior

An individuals moral code13ehavior of an employees immediate supervisorExample set by CEO or company presidentFear of getting caught or losing ones jobCompanys economic situationCustomer opinionsWhat others would thinkCompany code of ethicsCompany wlues or cultureI.evel of ethical behavior of coworkersPotential harm to firm. stockholders. employees. and customersCriminal or civil lawPersonal religious beliefs

The most dramatic conflict evoked by the survhas to do with the relative perception amongconsumers and CEOs of the recent track recordof business in the ethical realm. Most strikingly,44 percent of the CEOs surveyed viewed busi-ness ethics as having improved in the last fiveyears, whereas only 16 percent of the consumerpolled agreed with this sentiment. In contrast, percent of consumers saw corporate ethics ashaving deteriorated, versus only 28 percent of executives willing to agree that this is the case.

These perceptions represent a startling clifence of opinion that likely affects the currentattitudes and ztions of both groups concerningbusiness ethics. In fact, consumer pessimismabout the performance of business in the ethicarealm extends beyond general perceptions. Ofthe 727 responding consumers who are currentemployed, only 27 percent were willing to grathat their own organization, company, or placeemployment was .highly ethical. In contrast, percent of CEOs saw their firm as highly ethi-cal. And 96 percent of CEOs were willing tocharacterize their firm as either ethical orhighly ethical, compared to only 65 percent

working consumers. In short,consumers and CEOs sharplydisagreed about the quality othe ethical business climate texperienced even in their oworganizations.

What factors are seen 21scontributing to the perceivedethical or unethical behavior?Perhaps this inquiry providessome clues 21s o why CEOs aconsumers see the ethical lanscape of business so differentlyAll respondents were given abattery of 13 items (see Table1) hat are commonly thoughtto have some influence on thethical behavior of an organizations employees. Consistent


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with what has been found in many other studiesof business ethics, the factor that emerged fromboth respondent groups as among the most im-portant was the example set by the CEO or com-pany president. However, even as these out-comes tended to support the old organizationaladage that a corporation is but a lengthenedshadow of the person at the top, this (positive)view was, again, held far more strongly by CEOsthan by general consumers. Ninety-two percentof CEOs felt that their role as head of the organi-zation had a strong influence on the ethics oftheir employees, whereas only 57 percent of thegeneral public was willing to designate the roleof the CEO as strong. Nevertheless, it shouldalso be noted that 89 percent of the general pub-lic was willing to grant that the role of the CEOwas a strong or moderate influence in deter-mining the ethical behavior of a companys em-ployees.

An interesting pattern emerged in the polldata concerning the points of similarity and con-trast between consumers and chief executives.The example set by the company CEO, the be-havior of ones immediate supervisor, and anindividuals moral code all emerged among thetop four factors in influencing moral behavior forboth respondent sets. In other words, bothgroups think these factors are important shapersof ethical behavior. However, in each case CEOswere more willing to grant a characterization ofstrong influence to these items than were con-sumers. For instance, 84 percent of CEOs saw thebehavior of the employees immediate supervisoras a strong influence, compared to only 59 per-cent of consumers; 92 percent of CEOs saw theirown example as a strong influence, versus only57 percent of consumers; and 82 percent of CEOssaw an individuals moral code as a strong influ-ence, versus only 59 percent of consumers.

One possible inference to be drawn fromthese findings is that CEOs see existing adminis-trative mechanisms within organizations, such astheir own role modeling and immediate superv-sion, as determining ethical behavior to a fargreater degree than most consumers do. It shouldalso be noted that the majority of both groupsranked the fear of getting caught as a stronginfluence. In addition, factors such as customeropinions, the law, and an organizations eco-nomic situation were perceived by the majority ofboth CEOs and consumers as being of moderateinfluence. (Again, see Table 1 for a completeranking of attributions perceived as strong bythe two respondent groups.1

The gulf between the perceptions of CEOsand consumers was marked in another importantarea. When people were asked what they usuallydid when they discovered unethical behavior intheir own organization, 63 percent of the CEOs

The Ethics of Business: Improving or Ikteriorating?

Table 2What People Usually Do When They Discover UnethicalBehavior In Their Own Company

CoFaszLrrle cI:OMind their own txlsiness 46%) 29HlReport it to authorities in the company 36% 63%Gossip, complain, or talk to coworkers 12% 13%Talk to the transgressor directly 12% 8%Fire the transgressor 9% 13%1Report t to authorities outside the company XAJ 7?41Try to right the ethical wrong 7% 7%)Quit 4% 3%)Cover it up 2%) 2%

felt that most often employees reported it to au-thorities in the company. In contrast, only 36percent of consumers believed this was the case.A substantially higher percentage of consumers(46 percent) felt that the typical response of em-ployees was to mind their own business. Only29 percent of CEOs agreed with this. In short,one might infer that the majority of CEOs per-ceive a corporate environment in which mostunethical behavior quickly becomes known.Meanwhile, consumers see a corporate playingfield in which much unethical behavior is ignoredby organizational employees and what ultimatelyis found out is only the tip of the iceberg.Table 2 provides a further summary of actionstaken when unethical behavior is discovered.

The cross-perceptions between CEOs andconsumers extend to the realm of what should bedone to manage ethics in the organization. Dis-turbingly, there is substantial disagreement overWhat all U.S. companies should have in place fordealing with ethical problems. Although the twogroups tended to agree about the importance ofcodes of ethics and employee training (topics tobe discussed later), there was notable disagree-ment over two other organizational mechanismsthat are sometimes recommended for controllingthe ethical climate of the organization. Seventy-seven percent of the consumers felt that organi-zations should definitely have in place rewardsfor employees who act ethically. But only 39percent of CEOs said definitely yes to thisproposition. In addition, 69 percent of consum-ers, compared to only 35 percent of CEOs, fel tthat firms definitely should have a companycommittee to decide ethical disputes and punishethical violators.

Reflecting on these findings, one can con-clude that CEOs feel there are already severalorganizational mechanisms in place, such ascodes, that strongly influence morally responsiblebehavior in employees. In contrast, consumersare asking for additional specific mechanisms,such as positive reinforcement in the form of


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Table 3Comparison Of The Corporate Ethics Of American CompaniesWith Foreign Competitors

Table 4Experiences That Lead People To Think A Company Is EthicalOr Unethical (An Open-ended Question)

Media coverngePersonal experiences kvith company employeesCompanys reputation or past history1 ow the company treats its employeesQuality of products and services

rewards for ethical employees and negativereinforcement in the shape of company commit-tees that would mete out punishments for ethicalviolators.

If there is any doubt that consumer disdainfor the ethics of American organizations has relative as well as absolute manifestations. it is in-structive to examine the question that asked allthe respondent groups to compare the corporateethics of American companies with those of for-eign competitors. When asked to compare LJ.S.businesses to Japanese businesses, 51 percent ofCEOs felt that LJ.S. firms had better ethics thanJapanese companies, whereas only 27 percent ofconsumers were willing to agree that such wasthe case. American executives are no doubt dis-mayed to learn that their arch competitors, theJapanese, are perceived as the more ethical op-erators. However. it should also be noted that themajority of consumers and CEOs felt that theethics of American companies were better thanthose of other businesses operating in ThirdWorld countries and similar to those of other(foreign) businesses operating in industrializedcountries (see Table 3).In summar?;, what emerges from these pointsof contrast is that CEOs see a much healthierpicture than do consumers when it comes to theethical performance of American businesses. Inother words. the U.S. public is far more pessimis-

tic than CEOs. The result is a gap in etcal perceptions about American organiztions that no doulX contributes to thecomplacency of many CEOs as well as negativism embraced by many consumerwhen judging the overall societal performance of IJ.S. business organizations.

Points of Agreement Between CEOsand ConsumersConsumers and CEOs do agree on someethical questions. First, there is the imptant role played by the media in shapingsocietys ethical perceptions of business.When respondents were asked what exriences led people to think a companywas ethical or unethical, media coverage\vas mentioned most among both consuers and CEOs. In response to an open-ended, unprompted question. SH percenof the corporate CEOs and 22 percent othe consumers considered media coveraimportant in shaping their opinions ;b)othe ethicality of U.S. organizations. Thisfactor was evoked more often than othelikely factors, such as public relations eforts, the general quality of 21companysproducts and services. or an organizationcommunity and charity aark. In the cas

of the CEO respondents, the media emergecl athe dominant factor by ;I consicleral~le margin.Thus, it seems clear that the niedi:l play the crcal role of gatekeeper in shaping and overseeinthe corporat~iconsumer communications relatiship. The other most frequently mentioned fattors in molding public perceptions about busi-ness ethics are noted in Table 4.

Both sets of respondents were also askedabout the ethicality of ;I series of issues facingAmerican businesses on ;I daily basis. Bothgroups most often characterized these sameSeven i ssue5 as always \vrong:

l misleading advertising or labeling:l causing environmental harm;l poor product or service safety;l padding expense accounts;l insider trading:l dumping banned or tl:iwed products in

foreign markets; andl lack of equal opportunities for momen minorities.In all c3ses. more than 70 percent of consu

ers and CEOs felt that businesses engaging insuch practices were alzllq~a ethically wrong (seTable 5 f or a full list of the issues). The upshotthese findings is that when it conies to specificbusiness practices, there is apparently ;1 moreextensive common value system between con-sumers and CEOs than some skeptics might gr

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When asked what mechanisms Americanfirms should have in place to maintain and im-prove their ethical postures, the vast majority-more than 79 percent-of both CEOs and con-sumers answered definitely yes to having awritten code of ethics specific to their businessesand to employee training programs [that] en-hance the ethical behavior of corporate employ-ees. Recent studies, in fact, such as the one bythe Center for Business Ethics (1$X36),establishthat the majority of corporations already havecodes of ethics in place. And ethics training pro-grams, though not as prevalent as codes, areincreasingly common.

Taken together, the findings discussed aboveinvolving the importance of the media, the clarityof the unethical nature of certain specific busi-ness dealings, and the importance of havingcodes of ethics and ethics training programs foremployees suggest a baseline agreement overfundamental ethical expectations among bothconsumers and CEOs.Causes of Faulty Cross-PerceptionsAmong Consumers and CEOsDespite the areas of agreement discussed above.it is clear that the overall inferences the twogroups draw about current business behavior aredramatically different. Why should the reportedethical perceptions of these two groups, whichwere asked identical questions, be so different?In other words, why is there such a gap in theperceptions of consumers and CEOs concerningthe recent ethical track record of business? Ifconsumers and business leaders more or lessagree on what constitutes unethical practice, whydo they view the direction of ethical performanceby business so differently? We offer four possibleexplanations.Media exaggeration. It may be that con-sumers rely too heavily on the media for theirformation of perceptions concerning theethical performance of business. Themedia, somewhat understandably, tend toreport those emergent business newsevents that are of a more sensationalnature and downplay the mundane. TheJones Company performed well and hadmany satisfied customers seldom makesfront page news. Featuring the extraordi-nary or the negative underemphasizes thetypical actions of U.S. businesses, whichare usually ethical and above board. Theend result is comparatively heavy mediaexposure to stories about unethical busi-ness practices. Members of the public,then, possibly develop false perceptionsabout the actual record of business indischarging its ethical obligations.

Table 5Management Practices Always Considered Wrong

Misleading advertising or labelingCausing environmental harmPoor product or service safetyPadding expense accountsInsider tradingLack of equal opportunities for women and minoritiesDumping banned or flawed products in foreign marketsOverpricingHostile takeoversMoving jobs overseasUsing nonunion labor in a union shop 35%)Closing the plant 25%

Unrealistic consumer expectations ofbusiness. This explanatory scenario would sug-gest that the typical American consumer does notunderstand the operational pressures facing U.S.managers. Just as politicians and sports heroesare sometimes held up to unrealistically highideals, so too the American public has raised itsethical expectations of business performance sohigh as to be unrealistic. The reality may be thatas business is conducted by a subsample of thetotal U.S. population, some of that subset of man-agers will occasionally act in an unethical man-ner; thus, given the large volume of decisionsmanagers must make, some ethical transgressionsought to be expected. Failing to grasp this reality,consumers instead judge the current less thanperfect performance of business too harshlywith regard to meeting its ethical obligations.Managers, like any group of people, will occa-sionally have ethical lapses because they arehuman. prone to temptation, and likely to makemistakes-even in the arena of moral judgment.

Following this scenario further, one mightpostulate that consumers do not fully compre-hend the harsh economic reality of the market-place and the role of profits in motivating behav-ior. They fail to see the intensely competitiveenvironment forcing tough economic decisionsand occasionally questionable actions. Thus,consumers are unrealistic in their desires for aneconomic system that is pure as the drivensnow. After all, greed and the promise of ex-traordinary returns on investment are built-inlubricators of our current economic system. Eco-nomic efficiency and effectiveness require trade-offs that sometimes disadvantage some consumergroups. Fortunately, over time the U.S. economicsystem has been self-tuning to the extent that itsmost egregious violators are purged from within.Eventually. the worst transgressions are elimi-nated by the legal and regulatory system as wellas the invisible hand of competition. However,


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If the publics perceptionof corporate ethicalperfornmnce does notimprove, the usual nexusof effects fhat are abyproduct of business andsociety tension will kick in. N

some unethical practices are always the residualof an imperfect system. If consumers better un-derstood the economic reality of the marketplace,

they would realizethat their character-ization of the pastethical performanceof business 3s de-teriorating is unfairunder the circum-stances. In otherwords, the currentlevel of ethicalperformance bybusiness is ahoutwhat a complexcapitalistic systemwill normally pro-

duce. So consumers standards are too high whenjudging the ethicality of American business.The survey effect. This explanation wwuldsuggest that the CEO respondents have intention-ally inflated the positive ethical track record ofbusiness b~use they knew they were pal-ticipat-ing in a national opinion poll. Put another way,the executives realized that hcrsiness has fa- to goin toeing the expected ethical line hut neverthe-less gave business a good report card to miti-gate further public criticism of its social perfor-mance. This explanation would suggest in partthat CEOs are playing 3 public relations game incharacterizing the ethical performance of 113.husinesscs as improving over the past five yearswhen. in their hearts, they know that consumerviews xe closer to the truth than u-6 theirs.Wish fulfiient. CEOs identify morestrongly with and feel more responsibility for theworkings of their organizations than consumersor employees do. Thus, it is more psychologicallydisruptive for CEOs (or other high-ranking busi-ness executives) to perceive the ethical shortcom-ings of LJ.S. business. So CEOs are psychologi-cally pressured to paint 3 distortedly positivepicture of organizational ethics. This personalbias compels them to exaggerate the ethical ac-complishments of American corporations.What Happens if the Consumer/CEOExpectation Gap Is Not Reduced?If the publics perception of corporate ethicalperformance does not improve. the usual nexusof effects that are ;L byproduct of business andsociety tension will kick in. First will come theincreased likelihood of governmental scrutinyand regulation. The early 1770s have alreadybrought manifestations of this in the form oftightened regulations for the banking and securityindustries, the promulg:Uion of standards forenvironmental advertising claims, the greater

frequency of consumer boycotts. and the morestringent labeling requirements for alcohol, fooand drug products.

Second. consumer skepticism about businestruthfulness will continue to increase. Much dicussion in recent years has centered around threduced credibility of LJ.S. advertising claims,with 3 resulting erosion of brand loyalty due ipart to consumer cynicism about the superiorityof various product claims. Such large manuEicturers as Procter ,ui Gamble and Anheuser-Buschhave been forced to severely price discountmany of their top brands hecause they can nolonger effectively command the attention andloyalty of consumers who question the veracityof corporate claims. It does not take a great leof logic to see how general consumer concernsover the ethicality of business practice would lead to doubts about various product performancclaims businesses make regarding their goodsand services. Such :I climate greatly adds to afirms advertising, sales. and public relationscosts.Third, public distrust for business in generais exacerbated if American consumers continuallquestion the ethics of I J.S. corporations. Again,failure to reduce this misperception an lead tsevere systemic consequences. Hccac~se ulti-mately business is granted license hy society tperform its economic function, in the long runwhen husincss accountability is not in txdancewith business power, the public cm intervene make structural changes that will affect the verstrictures under which firms operate. Admittedly.such adjustments take a fair amount of time tounfold. But when they do, the changes in grourules are often of major proportions. One needonly look at the current restructuring-soiii~would say reinventing-of the American healthcare system to find a clear ex:imple of societyshaving found the performance of 3 particularsector of the economy to he unsatisfactory, witthe end result being that a nujor sea change ioccurring.What Business Should DoThe costs discussed above, which businessesincur if they ignore the publics negative perceptions of their performance, dictate that somethingshould be done. At a minimum, three organiza-tional strategies are recommended:

1. Communicate more effectively withconsumers. Many members of the public, be-cause of their general reliance on the media,simply are not told often enough about the gothings businesses are doing. Corporations wishito improve their relationship with the public mlet stakeholders know when they participate inundertakings that benefit the commonweal, or


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when they accept lower profits than what is dic-tated by the market because of ethical consider-ations. Many companies, in fact, have exemplaryethical records and a renowned history of satisfy-ing customers and the general public. Variousbooks have celebrated the best companies towork for, corporations that put the consumerfirst, and organizations known for their overalllevels of excellence. Business organizations needto understand they are entitled to celebrate theirethical and societal successes, especially whentheir failures are so readily publicized by themedia. But reducing the ethical expectations gapbetween business and the public is going to takemore then a well-oiled public relations machine.

2. Cultivate higher ethical expectations.Businesses simply must resolve to be more ethi-cal economic agents. Certainly many firms haveengaged in a number of ethical violations thatmerit public outrage and thereby promote con-sumer skepticism. For example, in this particularopinion poll (again, see Table 5), far more con-sumers than CEOs perceive ethical questionsinherent in such business practices as movingjobs overseas, closing plants, and using nonunionlabor in a union shop. Businesses must becomemore empathetic to consumer concerns. Someyears ago, many quality control procedures al-lowed for a 1 percent failure rate; by meeting thisstandard, businesses judged themselves success-ful. Today, partly because of the higher standardsset by foreign competition, most American firmshave a target of zero defects-which manyattain.

A goal of zero ethical transgressions is alsosomething organizations must increasingly strivefor. This is already happening in certain eco-nomic sectors. Twenty years ago, the companiesthat took steps to make their products and opera-tions more compatible with the environmentoften did so on a largely voluntary basis. Sincethen, public expectations have evolved to suggestthat environmental concern is a strategy compa-nies must internalize as part of their basic operat-ing fabric. In short, higher public standards haveemerged and businesses have adjusted accord-ingly. Sadly, however, the fundamental problemis not just the occasional transgression by thegenerally ethical corporation, but the intentional,malicious organizational wrongdoers-the corpo-rate crooks-that perpetrate unethical practices asa matter of course. Nevertheless, across multipleethical issues, public outrage over certain dubi-ous business practices suggests that the well-intentioned majority of firms must strive to con-trol all ethically questionable tactics. Progresstoward such goals needs to be systematicallymeasured.

3. Measure public expectations and ethi-cal business performance. Not many years

ago, ongoing customer satisfaction surveys abouta firms products and services were used almostsolely by the exceptional organization. Now suchresearch is standard operating procedure, at leastamong medium and large firms. So, too, is itnecessary for organizations to regularly assess theethical image they hold in the eyes of the generalpopulace. Especially critical here would be deter-mining the opinions of key stakeholders of theorganization, such as members of the generalpublic who live in the host community and con-sumers who are

and services. Pub-lic perceptions of afirms moralityshould be trackedlongitudinally,

When conflicts emergebeiween profif and otherstakeholder demands, amuch as a firmgathers customer company must ask itselfperceptions of its a systematic series ofadvertising cam-paigns. At the questions about the focussame time, organi- of its business practices. *zations must regu- Ilarly assess howthey themselves are doing in the ethical realm. Atechnique called the ethical audit has beenrecommended by organizational consultants spe-cializing in ethics. According to this approach,when conflicts emerge between profit and otherstakeholder demands, a company must ask itselfa systematic series of questions about the focusof its business practices. At the most global level,companies taking ethical stock of their generalcorporate culture should consider having theirmanagers respond to the following:

l Do you consider your relationshipwith your organizational peers to beprimarily one of competition or one ofcooperation and mutual trust?

l Does your organization have he-roes? Who are they, and what are theirvirtues? Any notable vices?

l Do you generally work underpressure? Do you ever feel pressured todo more or achieve more than you be-lieve is reasonable or possible? Wheredoes this pressure come from?

l Do you feel pressured by yourorganization to act contrary to your ownmoral judgement? If so, how seriously,and at what risk?Although the ethical audit is a relatively im-

precise tool when compared with the more tradi-tional financial audits conducted by accountants,such analysis generally provides sufficient infor-

The Ethics of Business: Improving or Deteriorating?


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rnation for organizations to judge whether theyare moving in the proper ethical direction bybalancing various stakeholder interests.I susiness ethics improving or deteriorating?Chief executives. says our poll, view thepicture optimistically: members of the generalpublic are far more pessimistic al,out the directionof business ethics in society. This divergence isfurther supported by striking contrasts in percep-tions of the importance and effectiveness of \zri-ous strategies and mechanisms. such as employeereward and punishment systems. that companiescould put into place to oversee ethical conduct.

Certainly this gap in perception raises ques-tions ;dmut the reality of ethical business pet-for-nmxx. Who is right! Are the CEOs or the generalpublic closer to the truth? Academics and policyanalysts should attempt to estaldish reality bylongitudinally marking the ethical pcrformancc ofbusiness via various quantitative measures. such2s the number of criminal charges b-oughtagainst I,usiness managers, violations of federalregulations occurring over time, scandals re-ported in the business press, and so on. Similarly,further attempts should he ix& to compare theethics of different professional groups. For ex-ample. are I,usiness professionals any more un-ethic-d than. say, a cross-sample of lawyers, poli-ticians. or physicians?

Interesting as they are, such inquiries are notthe critical issue. Rather, the cross-perceptionsreported here represent the classic situation inwhich the perception is the reality. If the majorityof consumers. in contrast to managers, Idievcthat the ethics of business is deteriorating. then

Ezra Howen Ethics: Looking To Its Roots, Time, b25, 1987, pp. X-29.Steve 13renner and Earl Molar&r, 1s the Ethics ofUusiness Changing? Ilunard B7rsims.s Rwirrr, Januxry-Felxuary 1977, pp. 52-71,

Corporate Ethics: A Prime I~usiness Asset. A Kcpo017 Pol iql ~7x1 Pructicc ir? Bzrsitxs.s Cht~dircl. JanesKeogh. ccl., Husiness Koilndtal~le. I:elxuai-)l 198X.

the costs associated with such beliefs will inevita-bly be incurred: more regulations, more govern- David Gavin. Competing on Eight i)iniensions ofment intervention, renewed consumer chdlenges. Quality, JJar~ztIZ1sitzess RelW~: Noveinl,er-l)e~ernand so forth. At ;I time when American business IXY 19x7, pp. 101-109.is desperately trying to reduce its cost structure toremain internationally competitive in the gloldeconomy. LT,S. firms cannot afford the promo-tional costs inherent in skeptical consumers andthe fickle buying habits such cynicism promotes.It m-ould hc ironic if the cost savings from varioustechnological advances and more efficient man-agement methods were simply exchanged for thehigher cost of placating an increasingly angryand distrusting American public. 3

Kenneth E.. Goodpaster. Business Ethics and Stake-holder Analysis. Ulrsitxss Ethics Qzlartwjy. January1991, pp. 53-73.


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Julie L&se, As I3rand Loyalty Crumbles, MarketersLook for Answers, Aduertisirzg Age, December 2, 1991,pp. 1h+.Patrick E. Murphy, Creating Ethical Corporate Struc-tures, Sloan Management Reuiezo, Winter 1989, pp. 81.86.Patrick E. Murphy, Implementing Business Ethics,Jozmlal of 13usim53 Ethics, December 1988. pp. 907.915.Jacquelyn A. Ottman, Green Marketing: Chulhges urzd0ppvturzitie.s for theVez~Marketing Age (Chicago:NTC Business Books. 1992).Tom Peters and Nancy Austin. A Passion fk EjccelkmceO%xv Tiork: Kandom House. 1985).Todd Putnam, Boycotts Are Busting Out All Over,Bxhess arzd Societ?/ Reviezr: Spring 1993, pp. G-50

W. Williams, White Collar Crime: Booming Again.New York!Times, June 9, 1985, Sec. 4, p. 1.

Gene R. Laczniak is the Sanders Professorof Marketing at Marquette University,Milwaukee, Wisconsin, where Marvin W.Berkowitz is an assoc iate professor of psy-chology as well as the assoc iate directorof the Center for Ethics Studies. Russell G.Brooker is an assistant professor of businessand management at Alverno College inMilwaukee, as well as a senior researchanalyst with Dieringer Research Assoc i-ates. James P. Hale is a senior manage-ment analyst with The Gallup Organizationin Lincoln, Nebraska.

The Ethics of Rusiness: Improving or Deteriorating?

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