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Building Houses on Rocks: The Role of the Ethical Infrastructure in Organizations

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We present and discuss a theoretical model of an organization's ethical infrastructure, defined as the organizational elements that contribute to an organization's ethical effectiveness. We propose that the infrastructure is composed of both formal and informal elements—including communication, surveillance, and sanctioning systems—as well as organizational climates for ethics, respect, and justice. We discuss the nature of the relationship between these elements and ethical behavior, the relative strength of each of these elements, and their impact on each other. Theoretical and practical implications of this model are presented.
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Social Justice Research, Vol. 16, No. 3, September 2003 ( C
°2003)
Building Houses on Rocks: The Role of the Ethical
Infrastructure in Organizations
Ann E. Tenbrunsel,1,4Kristin Smith-Crowe,2and Elizabeth E. Umphress3
We present and discuss a theoretical model of an organization’s ethical infrastruc-
ture, defined as the organizational elements that contribute to an organization’s
ethicaleffectiveness.We proposethattheinfrastructureiscomposedofbothformal
and informal elements—including communication, surveillance, and sanctioning
systems—as well as organizational climates for ethics, respect, and justice. We
discuss the nature of the relationship between these elements and ethical behavior,
the relative strength of each of these elements, and their impact on each other.
Theoretical and practical implications of this model are presented.
KEY WORDS: ethics; communication; sanctioning; climate; justice; respect.
Therefore everyone who hears these words of mine and puts them into
practice is like a wise man who built his house on the rock. The rain came
down, the streams rose, and the winds blew and beat against the house;
yet it did not fall, because it had its foundation on the rock. But everyone
who hears these words of mine and does not put them into practice is
like a foolish man who built his house on sand. The rain came down, the
streams rose, and the winds blew and beat against that house, and it fell
with a great crash. Matthew 7:24–27
(Holy Bible, 2001)
The business community has been deluged, not with rain per se, but with
reports of corporate wrongdoing. In a sample of 1500 employees in the United
1Mendoza College of Business, University of Notre Dame, Notre Dame, Indiana.
2Tulane University, New Orleans, Louisiana.
3Texas A&M University, College Station, Texas.
4All correspondence should be addressed to Ann E. Tenbrunsel, Mendoza College of Business,
University of Notre Dame, Notre Dame, Indiana 46556-0399.
285
0885-7466/03/0900-0285/0 C
°2003 Plenum Publishing Corporation
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286 Tenbrunsel, Smith-Crowe, and Umphress
States,31%reportthattheyhaveobservedsometypeofwrongdoinginthelastyear
(Joseph, 2000). Recent examples of unethical activity within large corporations
such as Enron and Worldcom have plagued the news and the stock markets. Such
reports have damaged confidence in our businesses, shattered our faith in our
leaders, and undermined our belief in an ownership–based society.
If businesses are to regain the footage that they have lost, they must demon-
strate that they are organizations that can be trusted to make ethical decisions. Part
of that demonstration will involve developing ethical structures that will commu-
nicate and reinforce the ethical principles to which organizational members will
be held. Most organizations have either established such structures or are in the
processofdoingso.Companiesarespendingmillionsofdollarsonethicsandcom-
pliance management with almost 100% of them addressing ethics-related issues
in formal documents and programs (Trevino, Weaver, Gibson, & Toffler, 1999).
Corporate codes of conduct, value-based mission statements, ethical ombudsmen,
and ethical training are just a few of the strategies undertaken by organizations in
response to the increased pressure to become more ethical.
Unfortunately, the results of such efforts are decidedly mixed. Formal codes
of conduct, for example, have been argued by some to produce positive outcomes,
namely a reduction in unethical behavior (McCabe, Trevino, & Butterfield, 1996),
but by others to produce no discernible difference in behavior (Badaracco and
Webb, 1995). It has even been suggested that mechanisms designed to enforce
ethical behavior can actually be detrimental, increasing rather than decreasing un-
desirablebehaviors(Tenbrunsel andMessick,1999).Organizations,andultimately
society, are therefore in a quandary. We all realize that instilling ethical values in
corporations is a must, yet the effectiveness of such systems is questionable, and
therefore the results of such efforts uncertain.
We argue that designing ethical organizations requires an understanding of
how and why such systems work; that is, one must be able to distinguish between
ethical foundations of rock and those of sand. First and foremost, such an un-
derstanding requires an informed, theoretical identification of the organizational
elements that contribute to an organization’s ethical effectiveness. We introduce
the term ethical infrastructure to describe these elements, which we identify as
incorporating the formal systems, the informal systems, and the organizational
climates that support the infrastructure. We suggest that the first two elements can
be categorized both by the formality of these systems as well as the mechanisms
used to convey the ethical principles, including communication, surveillance, and
sanctioning systems. We further argue that these formal and informal elements are
part of another element of the ethical infrastructure—the organizational climates
that support the infrastructure—that permeates the organization.
Second, the nature and form of the relationship between these elements and
ethical behavior in organizations must both be considered. We argue for a positive
relationship between these elements and ethical behavior. However, we argue that
the form of this relationship is curvilinear, rather than linear, in nature.
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Ethical Infrastructure in Organizations 287
Thethird, and equally crucialstepisto understand howtheseelements interact
to influence ethical behavior. We propose a theory of ethical embeddedness to
describe these interrelations. We argue that formal systems are embedded within
their informal counterparts, which in turn are embedded within the organizational
climates that support the infrastructure. The strength and ultimate success of each
layer, we assert, depends on the strength of the layer in which it is embedded. We
use this theory to develop predictions about the relationships between the ethical
infrastructure and ethical behaviors. We conclude by linking these predictions to
their associated practical implications, including offering recommendations for
organizations that desire to enhance their ethical effectiveness.
ETHICAL INFRASTRUCTURE
The ethical infrastructure consists of formal and informal systems—each
including communication, surveillance, and sanctioning components—as well as
the climates that support these systems. These elements are visually depicted in
Fig. 1. In the following discussion, we argue that each of these elements are
important and that one must consider the interrelationships between them to fully
understand their influence on ethical behavior in organizations.
Formal and Informal Systems
We begin by identifying two dimensions by which formal and informal sys-
tems can be characterized: the mechanisms that convey the values and the formal-
ity of these mechanisms. We focus on three mechanisms: communication systems
thatconveyethical principles,surveillancesystemsthatmonitoradherencetothese
Fig. 1. Elements of the ethical infrastructure.
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principles, and sanctioning systems that reward or punish ethical behavior. We fur-
ther suggest that the delivery of ethical principles via these mechanisms can either
beformal or informal (cf. Warren,inpress). Wedefine formal systems as thosethat
are documented and standardized (e.g., Pugh, Hickson, Hinings, & Turner, 1968),
visible to anyone inside or outside the organization. Conversely, informal systems
are defined as those indirect signals regarding appropriate ethical conduct that are
received by the organizational members. Noticeable primarily to people inside
of the organization, such signals cannot be verified through formal documents.
Rather, they are “felt” by organizational members through personal relationships
(Lawler and Rhode, 1976; Selznick, 1943). In this section, we discuss the formal
and informal representations of the identified mechanisms and assert that they
make independent contributions to the ethical effectiveness of an organization. In
the next section, we also argue that these elements are interrelated, interacting to
influence ethical behavior. It is important to note that while formal and informal
systems can be directed toward behavior that is either ethical or unethical, our dis-
cussion (unless otherwise noted) assumes that the systems in question are directed
toward ethical behavior. One can expect the consequences of unethical systems to
be the opposite of those of ethical systems.
Formal Systems
Formal systems are those that are documented, that could be verified by an
independent observer. We focus on three types of formal systems that we believe
to be the most prevalent and the most directly observable: communication, surveil-
lance, and sanctioning systems. Formal communication systems are those systems
that officially communicate ethical values and principles. Formal representations
of such systems include ethical codes of conduct, mission statements, written
performance standards, and training programs. Formal surveillance systems entail
officially condoned policies, procedures, and routines aimed at monitoring and de-
tectingethicaland unethical behavior.Examples include the performance appraisal
itself as well as procedures for reporting ethical and unethical actions, including
reporting hot lines and ethical ombudsmen. Formal sanctioning systems are those
official systems within the organization that directly associate ethical and unethi-
cal behavior with formal rewards and punishments, respectively. Perhaps the most
obvious example of such a system is one in which unethical behavior is clearly
and negatively related to performance outcomes, such as evaluations, promotions,
salary, and bonuses.
While related, these systems independently influence ethical behavior. Take
the case of performance evaluations, which were identified in the discussion of
all three mechanisms. Performance standards are communicated through perfor-
mance criteria outlined in job descriptions, behavior relative to these standards is
monitored through the appraisal system itself, and employees are sanctioned (i.e.,
demotion, salary reduction) when such monitoring reveals that standards weren’t
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Ethical Infrastructure in Organizations 289
met. Each of these processes is independent. It is possible, for example, that a
performance standard is set, but never monitored, or that behavior is monitored,
but not sanctioned. Thus, it is important to recognize the contributions that each
of these mechanisms makes to the ethical infrastructure.
We assert that each of these systems influence ethical behavior and discuss
these relationships below. We do not intend, however, to suggest that these are the
only three formal systems that exist. Rather, we believe that these three elements
are representative of formal systems because of their prevalence and visibility.
Having identified and recognized these independent systems, in this manuscript
we integrate the separate systems of surveillance and sanctions. While we believe
thatsurveillanceand sanctioning systems are theoretically andempiricallydistinct,
they have been so closely aligned with each other (Tenbrunsel and Messick, 1999)
that, for the purpose of the ensuing discussion, we treat them as one system.
Formal Communication Systems. Organizational leaders use formal commu-
nication systems to convey expectations and standards for ethical conduct, and to
communicate the core values of organizations to employees. These systems pro-
vide employees with guidelines for ethical behavior by explicitly communicating
rules and procedures for performing one’s job in an ethical manner. In addition,
formal communication systems give top managers the opportunity to communi-
cate the guiding principles of the organization, and to help employees internalize
these values.
Formal communication systems include ethical codes of conduct, mission
statements, written performance standards, and training programs. These systems
are used quite frequently by organizations. For example, in a survey of the Fortune
1000, 98% of the 254 companies that responded formally addressed business
ethics or conduct issues within formal company documents (Weaver, Trevino, &
Cochran, 1995). In addition, 79% of a sample of 1500 U. S. employees reported
that their organization provided written ethics standards, ethics training, and/or a
system for getting advice about ethical issues (Joseph, 2000).
The most common formal communication system, ethical codes of conduct
(Weaver et al., 1995), are formal documents that specify the ethical conduct of
organizational members (e.g., Weaver, 1993). Although codes of conduct vary in
content, codes commonly contain (1) a summary of the purpose, context, adminis-
tration, and authority of the code; (2) a description of the company, including such
information as company philosophy; (3) a list of expectations for employee con-
duct regarding such topics as whistle-blowing, workplace safety, security, bribes,
substance abuse, and harassment; and (4) a reference to legal regulations (e.g.,
OSHA and antitrust regulations) pertaining to the company (Weaver, 1993).
Development of a code of ethical conduct has the potential to provide many
benefits to employers. For instance, a code offers guidelines to employees who
wish to behave ethically and legitimates the discussion of ethical issues within
the company (McDonald, 2000). In addition, codes of conduct help articulate
organizations’values, build employees’confidenceandtrustintheirorganizations,
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increase employee morale, regulate behavior, attract employees, and promote a
positive image to outsiders (Weaver, 1993). Codes of conduct also can serve an
instrumental purpose, used as a tool to defend organizations against legal action
(Weaver, 1993).
It has been found that the presence of these systems decreases the unethical
behavior of employees within organizations (McCabe et al., 1996). Messages
about ethics conveyed in mission statements, written performance standards, and
training programs help focus employee attention on ethical dilemmas and help
provide the tools and the guidance for employees to act in an ethical manner.
These systems give employees information about the types of behaviors that are
expected and those that are discouraged. Explicit, formal communications about
ethical conduct have the potential to increase the performance of ethical behavior,
especially when different systems act in concert. Therefore, to the extent that
an organization contains formal communication systems, ethical behavior will
increase.
P1: The presence of formal communication systems directed at ethical behavior
will be positively related to ethical behaviors.
Formal Surveillance and Sanctioning Systems. At the heart of management
theory is the command and control of employees (Barnard, 1938). From theo-
ries of reinforcement (Skinner, 1953) to agency theory (Fama, 1980; Jensen and
Meckling, 1976), the “monitoring and sanctioning of employee, managerial, and
organizational actions are portrayed as important components of firm success”
(Tenbrunsel and Messick, 1999, p. 684). According to these theories, to produce
desirable behaviors or reduce undesirable behaviors, one needs to monitor those
behaviors and distribute rewards and punishments accordingly.
Thisperspectivehasbeen the focusofgovernmentalandorganizational efforts
designed to improve ethical effectiveness within the corporate sector. President
Bush’s proposed crackdown on corporate crime focuses almost exclusively on the
use of formal surveillance and sanctioning systems (http://www.whitehouse.gov/
news/releases/2002/07/200020709.htm). Highlighted in this proposal, for exam-
ple, are official programs and legislature that “expose and punish acts of corrup-
tion,” “hold corporate officers more accountable,” and “develop a stronger and
more independent corporate audit system.” Tougher criminal penalties and en-
forcement mechanisms are advocated to increase the role of ethics in the corporate
community and repair the damaged integrity of our financial markets.
These proposals have their parallels in the academic community. Brief,
Buttram,& Dukerich(2001) advocatedanorganizationalstructurein whichsurveil-
lance could be carried out through a dispersed system of “checks and balances.”
Organizations are argued to influence ethical behavior through organizational goal
setting practices that utilize objectives and rewards to signal managerial values
(Cohen, 1995) and through demonstration to individuals about which behaviors
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Ethical Infrastructure in Organizations 291
will be rewarded and which will be punished (Trevino, 1986). The magnitude of
the consequences of an unethical act is asserted to be a key factor in influencing
ethical behavior, such that serious consequences are more influential than trivial
consequences (Fritzsche and Becker, 1983; Jones, 1991). Accordingly, organiza-
tions are encouraged to develop “reward systems that reward ethical conduct and
discipline unethical conduct” (Trevino, Butterfield, & McCabe, 1998, p. 471). To-
gether these assertions lend support for the assertion that formal surveillance and
sanctioning systems will directly influence ethical behavior.
P2:The presenceof formal surveillance andsanctioningsystems directedat ethical
behavior will be positively related to ethical behaviors.
Informal Systems
Despite their prevalence and visibility, formal systems reflect only the tip of
theethicalinfrastructure. Underlying formal systems, which again are systems that
aredocumentedand quite visible to the communityatlarge,are the subtle messages
that are received regarding ethical norms, or what is “really” appropriate from an
ethical perspective (Barnard, 1938). It is here that informal reinforcements gain
their stature. Organizational members receive informal signals about which ethical
(and unethical) principles are truly valued by the organization and its members.
Such signals might come through pressure exerted by coworkers to behave in
an ethically appropriate or ethically inappropriate manner, through patterns of
promotions and firings that are inconsistent with stated performance criteria, or
through informal conversations about ethics. As discussed below, while they are
differentin their visibility,informal reinforcements are similar to formal systems in
the mechanisms that are used to deliver ethical values—including communication,
surveillance, and sanctioning systems.
InformalCommunicationSystems. Informal reinforcements are partially dis-
tributed via informal communication channels. Informal communication systems
are defined as those unofficial messages that convey the ethical norms within the
organization. Informal, “hallway” conversations about ethics, informal training
sessions in which organization members are “shown the ropes,” and verbal and
nonverbal behaviors that communicate ethical principles all represent different
mechanisms by which ethical principles are informally communicated. For exam-
ple, organizational leaders communicate the importance or unimportance of ethics
withintheorganization through their ownactions (Cohen, 1993; Trevino,Hartman,
& Brown, 2000). When officials at Enron suspended their own code of ethics to
establish the partnerships that allowed Enron to hide millions (Barrionuevo, Weil,
& Wilke, 2002), this sent a powerful message to employees that ethics was rela-
tively unimportant in actual decision-making. Stories about organizational leaders
committing wrongdoing to save money, or sacrificing profit to remain ethical are
transmitted to organizational members and these informal communications can
impact whether or not formal communication systems are taken seriously.
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Informal Surveillance and Sanctioning Systems. In order for informal com-
munication systems to be effective, there must be an accompanying informal
surveillancesystem, consisting ofsomeoneor some mechanismthatcan informally
monitor ethical and unethical behaviors. Informal surveillance systems are those
systems that monitor and detect ethical and unethical behavior, but not through the
official channels of the formal surveillance systems. Rather, informal surveillance
systemsare carried out through,amongotherchannels, personal relationships (e.g.,
peers) and extra-organizational sources (e.g., the police). The informal represen-
tation of the surveillance system may best resemble a spy network, an “internal
CIA.” Contrary to the research on peer-reporting (i.e., Trevino and Victor, 1992),
which focuses on surveillance of group members’ behavior and the reporting of
such behavior to management, informal surveillance systems are conducted by
organizational members but do not follow official channels when reporting such
behavior. Rather, the observation and reporting of such behavior follows an infor-
mal chain of command, the origins of which may or may not be known even to
organizational members.
The informal observance of behavior that deviates from informal ethical
norms is often followed by sanctions delivered through unofficial means. Informal
sanctioning systems are those systems within organizations that directly associate
ethical and unethical behavior with rewards and punishments; however, unlike its
formal counterpart, informal sanctioning systems do not follow official organiza-
tional channels. Informal sanctioning systems may take the form of group pressure
tobehavein acertain manner or theperceived consequences that are experienced if
one engages in certain ethical or unethical activities. Organizational members may
threaten to punish someone for engaging in an ethical behavior, such as whistle
blowing,with such punishment including isolationfromgroupactivities,ostracism
(Bales, 1958; Feldman, 1984), and even physical harm.
An extreme representation of informal systems is found in an incident that
occurred at the James River mill in Green Bay, Wisconsin:
The voice on the police line was firm but halting: “OK. I’d like to report an employee
theft which is gonna occur at James River [paper mill] ...I witnessed ah, him, you know,
loading the stuff up ...to take it out...but, he ah, ah, he’s known to be violent ...” After a
five-day suspension for refusing to cooperate with an investigation of the reported theft, the
[accused] employee, Keith Kutska, legally acquired a recording of the call. Then he took
it to work, “because people wanted to know who the snitch was,” he said at a hearing. “I
played it and said, ‘There he is.’” One day later, on November 22, Monfil’s [the accuser’s]
body was found at the bottom of a 20-foot holding vat for tissue pulp. A jump rope attached
to a 40-pound weight was tied to his neck. (Worthington, Chicago Tribune, October 12,
1993)
At the heart of this story are two contrary views on the ethical principle
related to employee theft: the formal perspective, which classifies such behavior
as unethical and illegal, and the informal principle that employee theft is an action
thatshould be tolerated and, perhaps more important, not “snitchedon” by a fellow
union member. In exposing these conflicting views, the example depicts the types
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Ethical Infrastructure in Organizations 293
of informal mechanisms that are found in the workplace. The incident of employee
theft was reported via an informal surveillance system, namely by an employee to
someone outside the organization’s chain of control. The unwritten rule to never
snitch on a fellow employee was communicated informally and quite directly to
the rest of the group via the more than 40 replays of the taped conversation. The
sanctionsforviolatingthisethical norm—assault and murder—are extreme in their
formand certainlyinformal(i.e., not approvedby theorganization)in theirdelivery.
Informal reinforcements such as these are influential in ethical decision-
making because they convey which, if any, ethical principles are truly valued.
Whereas formal systems provide a more visible record of these ethical principles,
informal reinforcements are the invisible experiences that highlight behaviors that
are ethically (or unethically) appropriate. We therefore predict that informal re-
inforcements, and in particular informal communication, surveillance, and sanc-
tioning systems, are directly related to ethical behavior.
P3: The presence of informal communication systems that are directed at ethical
behaviors will be positively related to ethical behaviors.
P4: The presence of informal surveillance and sanctioning systems that are di-
rected at ethical behaviors will be positively related to ethical behaviors.
Trevino (1990) likewise noted the distinction between formal and informal
systems but utilized a different categorization than that offered here. Though there
is not a specific definition provided of formal and informal systems per se, Trevino
categorizes leadership, structure, policies, reward systems, orientation and train-
ing programs, and decision-making processes as formal systems, whereas infor-
mal systems include norms, heroes, rituals, language, myths, sagas, and stories.
We expand and enhance this distinction, making the distinction between type of
mechanisms—sanctioning, surveillance, and communications systems—and for-
mality. We assert that elements of the ethical infrastructure can be more accurately
described using both of these dimensions, such that there can be both formal and
informalcounterpartsof the same mechanism. As an example, whereasrewardsys-
tems are listed as formal in Trevino’s (1990) discussion, we believe, as previously
discussed, that there exist both formal and informal reward systems. Similarly,
the categorization of norms, heroes, rituals, language, myths, sagas, and stories
as informal mechanisms represent informal communication systems, which we
assert are just one type of the informal mechanisms that exist.
Organizational Climates That Support the Ethical Infrastructure
At the broadest level of the ethical infrastructure are the organizational cli-
matesthatsupporttheinfrastructure.Asdepicted in Fig. 1, it is within these organi-
zational climates that both the formal and informal ethical systems of
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organizations are embedded. In general, we define organizational climate as or-
ganizational members’ shared perceptions (e.g., Chan, 1998; Joyce and Slocum,
1984; Schneider, 1990) regarding a particular aspect of an organization; in other
words,organizationalclimates arein reference to something (e.g., ethics). Because
climate is born out of the context of an organization, climates vary across different
contexts (e.g., Naumann and Bennett, 2000; Rouiller and Goldstein, 1993; Tracey,
Tannenbaum, & Kavanagh, 1995; Zohar, 1980). Also, because the experiences
that organizational members have of any given context are so complex, multiple
organizational climates for different aspects of an organization exist simultane-
ously (Schneider and Reichers, 1983). We should note that some theorists have
made a fundamental distinction between organizational climate and a related con-
cept, organizational culture (e.g., James, James, & Ashe, 1990; Rousseau, 1990),
with the latter construct being essentially broader than the former. However, for
our purposes, we do not assume that these are two distinct constructs, but rather
that they are two different perspectives (i.e., using different language and coming
from different disciplines) of the same phenomenon (e.g., Ashkanasy, Wilderom,
& Peterson, 2000; Denison, 1996).
Just as multiple organizational climates can exist simultaneously within or-
ganizations, there are three related, yet distinct types of organizational climates
that support the ethical infrastructure: climate for ethics, climate for respect, and
climate for procedural justice. Following Victor and Cullen (1988; cf. Dickson,
Grojean, & Ehrhart, 2001), we define organizational climate for ethics as orga-
nizational members’ shared perceptions of “the events, practices, and procedures
and the kinds of behaviors that get rewarded, supported, and expected in a set-
ting” regarding ethics (Schneider, 1990, p. 384). We define organizational climate
for respect, which is a construct original to this essay, as organizational members’
shared perceptions regarding the extent to which individuals within their organiza-
tionareesteemed,shownconsideration, and treated with dignity.Finally,wedefine
organizational climate for procedural justice as organizational members’ shared
perceptions of how they are treated by their organization in terms of the fairness
of the procedures used to make decisions (cf. Naumann and Bennett, 2000).
The relationship between organizational climate and behavior has been con-
firmed in a number of empirical studies (e.g., Rouiller and Goldstein, 1993; Tracey
et al., 1995; Trevino et al., 1999). Generally speaking, organizational climate can
affect behavior because it serves as a signal to organizational members of what
behaviors are expected and rewarded (Schneider, 1990). Given the assumption that
individuals actively seek out information in their environments regarding appro-
priate behavior so that they can behave appropriately (Schneider, 1975), organi-
zational climate, or individuals’ perceptions of what is appropriate, has a clear
theoretical link to behavior.
Regarding the effect of an organizational climate for ethics on ethical behav-
ior,individuals’ climate perceptions signal what behaviors are considered ethically
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Ethical Infrastructure in Organizations 295
acceptable within an organization (Trevino et al., 1998; Victor and Cullen, 1987,
1988). Because individuals want to be accepted by those around them, they will
heed these signals and will behave ethically.
We expect an organizational climate for respect to affect ethical behavior
in a similar fashion, but in two very specific ways. First, we expect a climate
for respect to increase the salience of others in an organization. This salience of
others, in turn, should increase the weight an individual places on others’ welfare
and decrease the prominence of self-interest. Assuming that too great of a focus on
self-interestleadstounethicalbehavior(e.g., Kant 1785/1964), climate for respect,
throughpriming, can promote ethical behavior.Second, we expectthat as a climate
for respect entails organizational members perceiving that they are respected by
their organizations, they will show their respect for their organizations, in turn, by
cooperating with the formal ethical systems in place. This argument is consistent
with Rawls’ (1999) argument that if individuals are shown respect, then they will
not have to be coerced into participating in a system of justice. Rather, they will
participate freely. Likewise, Tyler (2001, p. 420) argued that when organizational
members feel that they are respected by their organizations, “even when dealing
withdifficultconflicts or disagreements, authorities can gainsupportanddeference
from all relevant parties....”
In addition, individuals’ perceptions of procedural justice can affect whether
they act ethically. In this case, as with a climate for respect, if members perceive
that they are treated fairly by their organization, then they will be inclined to recip-
rocate this fair treatment (e.g., Organ, 1988, 1990) through their ready compliance
with the formal ethical system (cf. Rawls, 1999; Tyler, 2001). Conversely, percep-
tions of procedural injustice would not compel organizational members to cooper-
ate with their organization’s ethical system. Our reciprocity explanation is implied
to some extent by speculation that positive procedural justice climates foster or-
ganizational commitment (Brockner and Wisenfeld, 1996; Naumann and Bennett,
2000), which in turn, predicts organizational citizenship behaviors (LePine, Erez,
& Johnson, 2002).
P5: Organizational climates for ethics, respect, and procedural justice will be
positively related to ethical behaviors.
Before progressing to the next section, three caveats are in order. The first is
the issue of conceptual overlap among ethics, respect, and justice. For example,
Kant’s(1785/1964) second formulation of his categorical imperative,knownas the
“respect principle,” states that one should never treat individuals merely as means,
but always as ends. In other words, according to Kant, one must show respect for
othersin ordertobe ethical.Incontrast, thebasicconceptualization ofutilitarianism
(where ethical decisions are based on the greatest happiness for the greatest num-
ber; e.g., Mill, 1861/1962) does not hold respect for others as an ethical principle.
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Also,some might arguethattheidea of respect is onepieceof the concept of justice.
Certainly, Rawls’ theory of justice, as it is based on the “original position,” holds
respect for individuals as a fundamental tenet of justice. Also, Tyler (e.g., Tyler,
2001; Tyler, Degoey, & Smith, 1996) has argued that individuals feel respected to
theextentthattheyaretreatedfairly.However, other theoriesof justice (e.g., Marx-
ism; Marx and Engels, 1848/1978) do not rely on respect as a tenet. Therefore,
while we recognize the conceptual overlap among these concepts, we have chosen
to consider them as distinct constructs for the purposes of this essay. In particular,
we feel that respect for the individual is a construct that has been overlooked in
the organizational ethics literature and, thus, deserves its own special treatment.
Second, it is necessary to discuss how climates supportive of the ethical
infrastructure at levels of analysis other than the organizational level function
within the ethical infrastructure. In addition to existing at the organizational level,
climateexists atlevelssuchas the individuallevel(known aspsychologicalclimate;
e.g., Burke, Borucki, & Hurley, 1992) and the team or group level (e.g., Colquitt,
Noe, & Jackson, 2002). Regardless of the level of analysis, climate is measured
at the individual level, typically through surveys of individuals’ perceptions. As
dictated by the commonly held composition model of climate, which assumes
isomorphism (Rousseau, 1985), a measure of individuals’ perceptions can then be
aggregated to any level for which there is a sufficient degree of agreement among
individuals (e.g., Chan, 1998; Schneider, 1990). However, because psychological
climateexistsat the individual level,agreementin perceptions is not a requirement.
Given the fact that climate at all levels of analysis consists of the perceptions
of individuals and given our argument that individuals’ climate perceptions will
influencetheirbehavior,we assertthatthefunctionoftheclimateswithinan ethical
infrastructure remains consistent regardless of its level of analysis.
The third caveat is this: in order to accurately convey this component of the
ethical infrastructure, it is important to distinguish the idea of organizational cli-
mate from the other primary elements of the ethical infrastructure. The distinction
between climate and the formal ethical system is simple. Organizational climate
consists of the perceptions of organizational members (e.g., Schneider, 1990) re-
garding ethics, respect, or procedural justice within organizations, whereas formal
ethical systems consists of tangible objects and events pertaining to ethics, such as
codes of ethics. Likewise, the informal ethical system consists of tangible objects
and events relevant to ethics (e.g., conversations among workers), while, again,
climate is made of perceptions.
ETHICAL INFRASTRUCTURE AND ETHICAL BEHAVIOR:
THE FORM OF THE RELATIONSHIP
The preceding discussion presents a picture of a relationship between the
elements of the ethical infrastructure and ethical behavior that is perhaps too sim-
plistic. While the relationship between these elements and behavior is expected to
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be positive, the form of that relationship is not expected to be linear. Rather, the
picture is more complex, with curvilinear, rather than linear, the more appropriate
description.
At the root of the proposed curvilinear relationships between elements of
the ethical infrastructure and ethical behavior is a proposed cognitive shift that
occurs when an ethical infrastructure is in place as compared to when such an
infrastructure is nonexistent. When an ethical infrastructure is nonexistent, an
individual must decide what is ethical. In contrast, when an ethical infrastructure
is in place, the individual interpretation of what is ethical is supplanted by the
interpretation that is advanced by the organization. Individuals in this type of
organizationno longer relyontheir ownvalues;rather,theylook to theorganization
to decide what is ethical.
This fundamental shift in whether it is the individual or the organization
that provides the foundation for evaluating ethical dilemmas influences the nature
of the relationship between ethical infrastructure and ethical behavior. When the
individual relies on the organization to provide guidance in interpreting the situ-
ation, as is the case when an ethical infrastructure (weak or strong) is in place,
the individual investigates how serious or committed an organization is to ethical
principles. Examining the strength of the ethical infrastructure provides this infor-
mation. A weak ethical infrastructure is a house built on sand; it suggests that the
ethical principles or values in question are relatively unimportant. Conversely, a
strongethical infrastructure is a house built on rock; it suggeststhat such values are
significant.
We argue that a weak ethical infrastructure, because it does not promote
individual reflection, results in more unethical behavior than when the ethical
infrastructure is nonexistent or is strong. When an organization has a weak eth-
ical infrastructure, individuals exhibit more unethical behavior than when such
an infrastructure is nonexistent because they engage in less sophisticated moral
reasoning; instead, they look to the organization for guidance but don’t find much
help. A weak ethical infrastructure also produces more unethical behavior than a
strong ethical infrastructure. In both cases, the individual looks to the organization
for guidance. However, by definition, in a strong ethical infrastructure, unlike in
a weak structure, the organization is clearly conveying the importance of ethical
principles. Consequently, when an organization has a strong ethical infrastructure,
they engage in more ethical behavior than when an organization has a weak ethical
infrastructure because the organization has sent a signal that ethical behavior is
important. While the reason for this ethical behavior is fundamentally different for
a strong ethical infrastructure (“I am doing this because the organization has told
me it is important”) than for a nonexistent ethical infrastructure (“I am doing this
because it is the right thing to do”), the end result is the same. Ethical behavior
is therefore higher when a surveillance and sanctioning system is either nonex-
istent or strong than when such a system is weak, thus producing the curvilinear
relationship.
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298 Tenbrunsel, Smith-Crowe, and Umphress
Tenbrunsel and Messick (1999) provide an illustration of this phenomenon in
thedomainofformalsurveillanceandsanctioningsystems.Theyargued and found
support for the proposition that cooperative behavior would be lower when a weak
versus a nonexistent sanctioning system was in place. Using a prisoner’s dilemma
asthecontext, subjects had the option to either cooperatebyadheringtoanindustry
agreement to reduce emissions or defect by not adhering to such an agreement.
Halfofthesubjects were told that there would be no fines associated with defection
(nonexistentsurveillance and sanctioning system), whereas the otherhalfweretold
that there would be a weak surveillance and sanctioning system (characterized by
a small probability of being caught and small fines if defection was noted). Results
provided support for the notion that the weak system would increase undesirable
behaviors,with defectionrates higher in the weak sanctioningcondition than in the
condition in which no sanctions were present. An additional study extended these
findings, illustrating that a weak sanctioning system produced less cooperative
behavior than both a nonexistent sanctioning system and a strong sanctioning
system.
Understanding these findings and the corresponding assertions is perhaps
clarified by considering the role that the decision frames play in ethical dilemmas.
Messick (1999) has suggested that decision makers first determine the type of
decision that is presented to them (i.e., to cooperate or compete), with this assess-
mentofthedecisionframe, in turn, influencing behaviors, expectations, and beliefs
about the situational norms. For example, Messick argued that the context might
signal to the decision maker that a situation is competitive versus cooperative. This
signaling, in turn, drives behaviors and other perceptions. If the signal suggests
that the situation is a competitive one, the decision maker determines how best to
compete and presumes that others will be competing as well. Conversely, if the
decision maker judges that it is a cooperative situation, the decision maker’s task
is to determine how to coordinate actions with others, who are also expected to
cooperate. Small changes in the situation, such as linguistic cues, are argued to
dramatically affect behaviors because they change the type of decision with which
individuals feel that they are faced.
Tenbrunsel and Messick (1999) utilized this theory to explain their results.
They found that the presence of a sanctioning system, independent of the strength
of that system, was less likely to prompt an ethical frame than when such a system
was not present. They argued that when a sanctioning system was not present,
individuals were more likely to view the decision as ethical and, hence, engage
in cooperative behavior because it was the right thing to do. When a sanction-
ing system was present, individuals were less likely to categorize the decision as
an ethical one and more likely to see it as a business calculation. In this case,
individuals cooperated only when the sanctions were strong enough to make co-
operative behavior an economically rational choice. One of the reasons for this,
they argued, is because a sanctioning system changes the reason for cooperating:
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Ethical Infrastructure in Organizations 299
without a sanctioning system, individuals cooperate because they have an intrinsic
desire to do the right thing, but when a sanctioning system is in place, that intrinsic
motivation is replaced by an extrinsic motivation to behave in accordance with the
payoff structure. In other words, individuals cooperate when a sanctioning system
is not present because they analyze the ethical components of the decision; how-
ever, when there is a strong sanctioning system, individuals cooperate because it
wouldbecostly to do otherwise. Thus, when a weak sanctioningsystem is in place,
cooperation is at its lowest level because individuals neither perceive the decision
to be ethical nor do the costs of defecting outweigh its benefits.
In the same manner, we argue that a weak ethical infrastructure is less likely
to produce ethical behavior than one in which there is no ethical infrastructure or
when a strong infrastructure is in place. When there is no infrastructure in place,
individuals are more likely to perceive the ethical dimensions of the decision and
hence are more likely to behave ethically. When a strong ethical infrastructure is
in place, individuals behave ethically because the organization is telling them that
they have to do so. However, when a weak infrastructure is in place, individuals
do not perceive the ethical dimensions of the situation nor do they sense any
deep ethical conviction from the organization. Consequently, ethical behavior is
least likely when an ethical infrastructure is weak. More formally, this argument
translates to the following proposition:
P6: The relationship between ethical infrastructure and ethical behavior will be
curvilinear, such that ethical behavior will be less likely when a weak ethical
infrastructure exists than when there is no ethical infrastructure in place or when
there is a strong ethical infrastructure.
RELATIONSHIPS BETWEEN ELEMENTS OF THE ETHICAL
INFRASTRUCTURE: RELATIVE STRENGTH AND EMBEDDEDNESS
The inherent ordering of the elements of ethical infrastructure is not random.
Rather, this ordering is designed to both convey the relative strength of the various
elements and to demonstrate the embeddedness of the various elements, or the
extent to which the elements are constrained by each other. More specifically, we
argue that formal systems are weaker than informal systems because the principles
that are conveyed through formal systems are less entrenched in an employee’s
organizational experience and hence the furthest removed from that individual;
similarly, informal systems are weaker than organizational climate because the
principles conveyed through informal systems are less rooted in the organizational
experience and hence further removed from the individual than those conveyed
through the relevant climates. We further argue that differences in the strength
of the various elements result in an ethical infrastructure which is embedded,
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300 Tenbrunsel, Smith-Crowe, and Umphress
one in which the weaker elements are constrained by those elements that are
stronger.
Relative Strength of the Elements of the Ethical Infrastructure
Ethical systems vary in the degree to which they reflect an organization’s
commitment to ethical principles, which in turn influences the degree to which
they influence an individual employee’s ethical behavior. The lower the perceived
commitment to ethical principles, the less salient they are in the organizational
member’s experience and hence the less influential they are in influencing an
individual’s behavior. We argue that elements that reflect a greater degree of com-
mitment to ethical values are those that are more inherent to the organization. True
belief in ethical principles is reflected not so much in what is said but in what is
done. In this sense, we predict that formal elements of the ethical infrastructure re-
flect a weaker degree of commitment than informal elements, which in turn reflect
a weaker degree of commitment than the relevant organizational climates.
Trevino’s (1990) discussion of ethical components also suggests that certain
systems are more important than others. More specifically, she asserted that those
systems that are more believable are more likely to influence ethical behavior.
Informal systems, for example, because they are more likely to “represent reality,”
are seen as a more important determinant of behavior than formal systems.
We agree, asserting that the degree of perceived commitment to ethical prin-
ciples is the underlying mechanism that explains the relationship between strength
of the ethical infrastructure and behavior. Simply stated, we predict that those sys-
tems that reflect a greater degree of perceived commitment to ethical principles
exhibita strongerinfluence on ethical behavior than those associated with a weaker
degree of commitment.
The assertion that elements of the ethical infrastructure vary in their strength
has support. Codes of conduct, along with other formal systems, are argued to be
limited in their effectiveness when they are not properly implemented or acknowl-
edged (e.g., McDonald, 2000). Thus, it is not entirely surprising that research
shows mixed results for the success of these formal systems (e.g., McCabe et al.,
1996). It has been suggested that some formal systems are used to generate the
appearance of ethical conduct to outsiders (Paine, 1994) when in reality these
systems are virtually ignored, or decoupled (Meyer and Rowan, 1977) from the
internal workings of the organization (Weaver, Trevino, & Cochran, 1999). In this
way, formal systems are seen as “window dressing,” systems that have little to
no impact on the actual performance of employees within organizations (Trevino,
1990). Weaver et al. (1999) stated that decoupling is likely to occur when ethical
principles are communicated to employees only in the form of policy statements
and memos, the format used for the majority of the formal communication sys-
tems. In support of this statement, Weaver et al. (1999) related an anecdote in
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Ethical Infrastructure in Organizations 301
which middle managers denied knowledge of their company’s ethical policy, even
though each of the managers had signed the document. Evidently, these formal
communications can be viewed within some organizations “as distractions to be
skimmed (at best), ‘filed, and forgotten”’ (Weaver et al., 1999; p. 541).
Theelementsof the ethical infrastructure described here—formalsystems,in-
formal systems, and the organizational climates supportive of the infrastructure—
varyin their perceiveddegree of commitmenttoethicalprinciples. Formal systems,
whicharethe most visible, are the mostlikelyto be perceivedasartificial,reflecting
the lowest degree of ethical principles. Informal systems, which represent “what
peoplereallythinkandhow people really behave”(Trevino,1990), conveya higher
degree of commitment to ethical values than do formal systems. Organizational
climate, because it demonstrates an underlying conviction to ethical principles
through the incorporation of ethical principles in the everyday treatment of its em-
ployees,representsthehighest degreeofcommitment to ethical principles. The old
clich´e, “actions speak louder than words” perhaps describes this proposition most
accurately (Trevino et al., 1999). Systems are therefore differentially effective in
their influence on ethical behavior, with pertinent organizational climates being
most effective (cf. Brief et al., 2001), followed by informal systems, and, lastly,
formal systems. More specifically, we make the following predictions.
P7: Elements of the ethical infrastructure differ in the perceived commitment to
ethical principles, with organizational climates for ethics, respect, and justice
perceived to be more reflective of a commitment to ethical principles than infor-
mal systems, which reflect a greater degree of perceived commitment to ethical
principles than formal systems.
P8: Elements of the ethical infrastructure that are perceived to reflect a greater
degree of commitment to ethical principles are more influential in affecting ethical
behavior, such that organizational climates for ethics, respect, and justice are
more effective in influencing ethical behavior than informal systems, which are
more effective than formal systems.
The Embeddedness of the Ethical Infrastructure
The depiction of the elements of the ethical infrastructure also conveys a
notion of embeddedness in which the effectiveness of an element of the ethical
infrastructure depends on the strength of the elements in which it is embedded.
Weaker ethical systems, or those with a more external focus, are part of, or em-
bedded in stronger ethical systems. Thus, the effectiveness of the more exterior or
superficial systems, such as formal systems, depends in part on the strength of the
more deep-rooted elements in which they are embedded.
We borrow the notion of embeddedness from Granovetter’s (1985) discus-
sion of the influence of social relations on institutions and behaviors. In contrast
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302 Tenbrunsel, Smith-Crowe, and Umphress
to a utilitarian perspective, which would argue for a minimal influence of social
relations on such behavior, Granovetter argues that behavior and institutions are
embedded in social relationships, such that they are “so constrained by ongoing
social relationships that to construe them as independent is a grievous misunder-
standing” (p. 482). In a similar vein, we argue that understanding the true impact
of formal systems, such as ethics training or corporate codes of conduct, on ethi-
cal behavior requires knowledge of the more fundamental elements of the ethical
infrastructure in which such mechanisms are embedded.
Atthebase of our proposition is the notion of consistency between the various
elements of the ethical infrastructure. In order for codes of conduct and ethical
training to have an impact, they must be consistent with more systemic ethical
elements, such as the organization’s informal reinforcements and the relevant or-
ganizational climates. If such congruence is missing, then employees receive a
mixed message, substantially reducing the impact that these formal systems might
have. For example, imagine a situation in which an organization engages in exten-
sive ethical training, but has an informal reward system that promotes individuals
based on the bottom-line, independent of the means used to get there. The ef-
fectiveness of this training would be substantially diminished in comparison to
a situation in which the organization’s informal system of promotions rewarded
individuals who were ethical.
Consistency in what is said and what is done has been identified as a crucial
factor in influencing ethical decision making within organizations. Reducing the
disconnect between organizational goals and the means to achieve these goals that
are expressed in the various aspects of culture is seen as necessary to promote
ethical conduct (Cohen, 1993). A failure to do so results in a form of normless-
ness and social disequilibrium, in which stated goals lose their “savor and force”
(Merton, 1964). Trevino et al. (1999), in an effort to determine which aspects of
ethicsand compliance management were beneficial, and conversely,which aspects
were detrimental, investigated how different approaches to ethics and compliance
management influenced the outcomes of such programs. They found that a firm’s
approachdid haveasignificant impact onemployees’attitudes and behaviors.Most
helpful, however, was the “consistency between policies and actions.” Procedures
and policies themselves were relatively unimportant. Rather, it was whether the
company actually followed through with these procedures (i.e., by working hard to
detect unethical behavior and by addressing ethical concerns raised by employees)
that really made the difference.
In addition to consistency between policies and actions that support those
policies, we argue for a more fundamental consistency between the various layers
or elements of the ethical infrastructure. The importance of the consistency among
these elements can be illustrated through the argument that strategically-focused
climates affect behavior (Smith-Crowe, Burke, & Landis, in press). This argument
runs as follows. Individuals seek out information in their environments regarding
appropriate behavior because they desire to cohere with their environments
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Ethical Infrastructure in Organizations 303
(Schneider, 1975). Climate perceptions are the result of this information seek-
ing, and, therefore, climate affects behavior. At the same time, when individuals
are aware of their organizations’ goals (e.g., when they are informed of their
organizations’ formal ethical systems), and when organizational practices are con-
sistent with those goals (e.g., when the formal and informal ethical systems are
consistent), individuals use this information to achieve an adaptive environmental
fit (Burke et al., 1992). Combining these two simultaneous processes, when indi-
viduals’ climate perceptions are consistent with both formal and informal ethical
systems, behavior is most predictable, because individuals have a clear and coher-
ent understanding of what behaviors they must engage in so that they can realize
their desire to “fit in.”
Following the strategically-focused climate argument (Smith-Crowe et al.,in
press), an organization’s ethical infrastructure will only be effective to the extent
that the elements within it act in concert. If they are to be effective, formal ethical
systems must reside in informal reinforcements and organizational climates that
are solid. If not, the formal systems acts more like a Band-Aid than an antibiotic,
addressing the symptoms, but not the underlying causes. Similarly, if the informal
system is incongruent with the pertinent climates, the effectiveness of that infor-
mal system is compromised. We therefore argue that stronger elements, or those
which reflect a deeper commitment to ethical principles and ideals, moderate the
effectiveness of weaker elements. More specifically, we propose the following:
P9: Elements of the ethical infrastructure interact to influence ethical behavior,
such that those elements that represent a deeper commitment to ethical principles
moderate the effectiveness of those that represent a weaker commitment.
CONCLUSION
Oursocietyis in an ethical crisis. Toconfront this crisis head on, organizations
need to build better ethical infrastructures, but to do so they need to understand
what constitutes this infrastructure and how the various elements that make up
the infrastructure influence unethical behavior. This information, we argue, must
come from an informed, theoretical examination. The purpose of this paper was
to provide the framework by which such an examination can be made.
We identify three important elements of the ethical infrastructure: formal
systems, informal systems, and the organizational climates that support the infra-
structure. With regard to the first two elements, we argue for a distinction between
the formality of a system and the mechanisms—communication, surveillance, and
sanctioning—by which ethical principles can be conveyed. With regard to the last
element, we identify three organizational climates—climate for ethics, climate for
respect, and climate for justice—that further constitute the ethical infrastructure.
While we propose a positive relationship between these elements and ethical
behavior, we also suggest that these relationships are curvilinear, such that ethical
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304 Tenbrunsel, Smith-Crowe, and Umphress
behavior is least likely to occur when these elements are weak in comparison
to when they are nonexistent or strong. We also discuss the relationship between
the elements, proposing that organizational climates have a stronger influence than
informalsystems, which haveastrongerinfluence than formal systems. Further,we
propose that the effectiveness of the weaker elements is dependent on the stronger
elements in which they are embedded, such that strong elements moderate the
effectiveness of the weaker elements.
Practically,ourdiscussionhasseveral implications fororganizationsthat wish
to increase their ethical effectiveness. First, it suggests that a focus on formal
systems—which are the most visible and the most highly touted—isn’t enough.
Rather, it is important to delve below the ethical exterior to uncover, other, perhaps
more important, elements, such as informal systems and organizational climates.
Second, the relationship between these elements is complicated, with half-hearted
attempts producing potentially disastrous results. Third, one must look at the ele-
ments of the ethical infrastructure in conjunction with one another, for it is really
the interplay among them that is critical.
In other words, there is no quick fix. Should organizations develop codes of
conduct, institute ethical offices, and develop training programs? Absolutely. Is
this enough? Absolutely not. It is equally imperative that informal systems and
organizational climates are investigated and addressed as well. Doing so requires
an understanding of such systems, such as the “real” talk that occurs between peers
and coworkers, the corresponding mechanisms that enforce informally prescribed
behaviors, and the extent to which organizational norms and climates emphasize
(or don’t) ethics, respect, and justice. Perhaps one of the worst things that can
happen is for an organization to put in figureheads and systems that are only
weakly supported. Perhaps even worse is to initiate an ethics program only to
abandon it, or decrease its importance, at a later point in time because attention
shifts elsewhere. Such weak, or weakened, efforts may send a signal that ethical
considerations are actually unimportant, thus increasing, rather than decreasing
unethical behavior. Will strengthening the ethical infrastructure as depicted here
take time? Yes. Will it be costly? Yes. Will it be worth it? We believe that it will be.
It is imperative that future research be directed toward advancing our under-
standing of the ethical infrastructure in organizations. For if we are truly to build
a house on rocks, we need to first identify which rocks are the most solid and how
they work with, or against, each other in the structure. Failure to do so will only
result in more storms and, inevitably, more houses coming down with a crash.
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