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A Conceptual Model of Corporate R.

Eric Reidenbach
Moral Development Donald P. Robin

ABSTRACT: TTie conceptual model presented in this article their particular stage of moral development. Such a
argues that corporations exhibit specific behaviors that signal typology is useful for better understanding the
their true level of moral development. Accordingly, the dynamics that contribute to ethical decision making.
authors identify five levels of moral development and discuss
the dynamics that move corporations from one level to
another. Examples of corporate behavior which are indica-
tive of specific stages of moral development are offered. The role of corporate culture in tnoral
development

The moral development of a corporation is deter-


The recent and conrinuing revelations concerning mined by the organization's culture and, in recipro-
the ethical wrongdoing of corporate America have cal fashion, helps define that culture. In essence, it is
occasioned a studied examination of the dynamics of the organization's culture that undergoes moral
ethical decision making in business. Several note- development.
worthy efFors, particularly those by Trevino (1986) Among the array of definitions of corporate
and Ferrell and Gresham (1985), have attempted to culture are those that focus on the shared values and
model the ethical decision making process in organi- beliefs of organizational members (e.g., Sathe, 1985;
zations. Deal and Kennedy, 1982), specifically, beliefs about
The Trevino model relies heavily on the idea that what works within an organization, and values about
an integral part of the ethical decision making preferred end states and the instrumental approaches
process involves the individual's stage of moral used to reach them. Among the constellation of
development interacting with, among other factors, beliefs and values that comprise an organization's
the organization's culture. It is this complex admix- culture are those that speak to its beliefs and values
ture of individual moral development and corporate about what is right and what is wrong. This is the
culture which leads to the proposition that, just as focus of this article.
individuals can be classified into a stage of moral The principal sources for cultural beliefs and
development, so too can organizations. In other values are from (1) individual organizational mem-
words, corporations can be classified according to bers, especially top management (e.g., Schein, 1983;
Wiener, 1988), and (2) the reinforcing effect of the
organization's success in problem solving and
achieving objectives (e.g., Schwartz and Davis, 1981;
R. Eric Reidenbach is Professor of Marketing and Director of the
Sathe, 1985). Central to this latter source is the
Centerfor Business Development and Research at the University
of Southern Mississippi. He has umtten extensively on business
organization's selection of a mission firom which the
and marketing ethics.
more specific objectives and reward systems flow.
Donald P. Robin, Professor of Business Ethics and Professor of
One mission of profit-making organizations is
Marketing at the University of Southern Mississippi, is coauthor economic. However, society, with increasing concem
with R. Eric Reidenhach of two recent booh on business ethics and concomitant pressures, is also demanding that
with Prentice-Hall. He is a frequent lecturer on business ethics they achieve certain social goals. The moral develop-
and is the author of several articles on the subject. ment of a corporation can be classified according to

Journal of Business Ethics 10: 273—284, 1991.


© 1991 Kluwer Academic Publishers. Printed in the Netherlands.
274 R. E. Reidenhach and D. P. Robin

the degree to which this required social mission is Five stages comprise the model. Each stage is
recognized and blended with the economic mission. given a label based upon the types of behavior or
Several studies and articles have focused on the organizadons that are classified within that stage.
importance of the organization's culture in deter- This produced the following ciassificatory schemata:
mining the morality of corporate activities (Robin the amoral organizadon; the legalisdc organizadon;
and Residenbach, 1987; Trevino, 1986; Hoffman, the responsive organization; the emergent ethical
1986). Of pardcular relevance is the work of Victor organizadon; and the ethical organizadon. The
and Cullen (1988) which measures work climate. model is depicted in Figure 1.
Work climates are defined as "perceptions that are
psychologically meaningful molar descriptions that SAumcED conciiiN

people can agree characterize a system's practice and


procedures" (Schneider, 1975). The ethical climate
questionnaire is designed to measure the ethical
dimensions of organizational culture. These items,
developed within the limited research context of
four firms, measure five ethical climate dimensions
characterized as caring, law and order, rules, instru-
mental, and independence.
The recognition that culture is an important
determinant in ethical decision making has accept-
ance outside academic management circles. When
asked about Drexel Burnham Lambert's recent
guilty plea and the reasons behind it, Edward
Markey, U. S. Representative (D. Mass.) replied that
there was a solid foundation of criminal acdvity Fig. 1. A model of corporate moral development.
behind their success. And when asked if this crimin-
ality was pervasive in the financial industry during The model is inspired by the work on individual
this dme, Markey responded, "there was definitely a moral development by Kohlberg (1964, 1976). How-
culture that tolerated it" {Wall StreetJournal (1988) p. ever, direct applicadon of Kohlberg's work is not
Bl). possible. Organizadons simply do not develop in the
same manner and under the same circumstances as
individuals. As was mendoned earlier, individual
An overview of the model moral development does contribute to the moral
development of an organizadon but is not deter-
The model of organizational moral development is a minant.
conceptual model built by the study of a large
There are several proposidons which make the
number of cases of organizadons and their acdons in
model operadonal:
response to a diverse number of situadons. The
ciassificatory variables include management philoso- Proposition 1: Not all organizadons pass through all
phy and atdtudes, the evidence of ethical values stages of moral development. Just as not all indi-
manifested in their cultures, and the existence and viduals reach level six of Kohlberg's model, not all
proliferadon of organizadonal cultural ethics and corporadons are desdned to be ethical organizadons.
ardfacts (i.e., codes, ombudsmen, reward systems). By The uldmate moral development desdnadon of a
observing the organizadon's acdons, the researcher corporadon is a funcdon of several factors including
can deduce differences in the moral development of top management, the founders of the organizadon
organizadons among the sample of cases. These and their values, environmental factors (threats and
differences form the hierarchical stages in the model. opportutiides), the organizadon's history and mis-
Evidence involving specific cases suppordng the sion, and its industry, to name a few (Robin and
classificadon schema is provided. Reidenbach, 1987).
Corporate Moral Development Model 275

Proposition 2: An organizadon can begin its life in to the moral development of an organizadon. Some
any stage of moral development. Again, the deter- organizadons will stay in a pardcular stage longer
mining factors are similar to those mendoned in than others. Again, the length of stay in a pardcular
proposidon 1. The key to the beginning point is an stage will be a funcdon of those factors cited in
overt management decision condidoned by a num- proposidon 1.
ber of situated factors.
Proposition 8: Two organizadons can be in the same
Proposition 3: Most organizadons in stage one do not stage but one may be more advaiiced. Thus, it is
leave stage one. Amoral organizadons, by their very possible that a corporadon which is classified as a
nature and oportunisdc pMosophy produce a cul- legalisdc corporadon may also manifest certain char-
ture that cannot adapt to the values and rules of acterisdcs of a responsive corporadon. This is a
society. Thus amoral organizadons are either forced funcdon of the dynamics of moral development.
to cease operadons or, reladvely quickly run their
life cycles. These organizadons that do evolve past
stage one do so at the cost of significant structural The stages of organizational moral
and cultural change. development
Proposition 4: An organizadon comprised of muldple Stage one — tlie amoral organization
departments, divisions, or SBUs can occupy different
stages of moral development at the same dme. That The Amoral Organizadon has a culture that is
is, one operadng area of the organizadon could be earmarked by a "winning at any cost" atdtude.
classified in stage one while other areas could be Typical of organizadons in this stage of moral
located in stage three. This muldple classificadon is development is a culture that is unmanaged with
based on subcultural differences within the organi- respect to ethical concerns. Producdvity and profit-
zadon. Each subculture will have embraced, to ability are the dominant values found in the culture.
greater or lesser extents, the formal culture. In those Concern for ethics, if it exists at all, is usually on an
cases where the formal culture dominates all operat- after-the-fact basis when the organizadon has been
ing areas, a muldple classificadon is unlikely. How- caught in some wrongdoing. At this point the con-
ever, when the individual subcultures doniinate an cern for ethics, if at all evidenced, becomes more of a
organizadon, muldple classificadons are possible. cynical jusdficadon or a post hoc radonalizadon of
behavior strictly for damage control purposes. Com-
Proposition 5: Corporate moral development does not mon to most management philosophies is that being
have to be a condnuous process. Individual corpora- caught in an unethical situadon is considered as a
dons can skip stages. New management or mergers cost of doing business. This culture is shaped by a
and acquisidons can impose new cultures on an strong belief in Adam Smith's invisible hand and the
organizadon. These new cultures may be radically nodon that the only social responsibility of business
different from the previous culture with respect to is to make a profit. Unlike Friedman's odginal
their ethical content impelling an organizadon to a contendon, that responsibility is seldom condidoned
higher stage of moral development. by the caveat of a need for law and ethic.
Proposition 6: Organizadons at one stage of moral Top management rules by power and authority
development can regress to lower stages. Regression and employees respond by acquiescing to that
typically occurs because the concem for economic authority and power through a reward system which
values is not adequately counterbalanced by the supports a "go along" type of behavior. Obedience
concem for moral values. In times of organizadonal is valued and rewarded. Disobedience, on a moral
stress the pursuit of economic values may win out basis, is punishable typically by expulsion from the
regardless of the morality of those values. In addi-organizadon. There is litde concem for the em-
don, new management or mergers and acquisidons ployees other than for their value as an economic
can also provide an impetus for regression. unit of producdon.
The ethical culture of a stage one organizadon
Proposition 7: There is no dme dimension associated can be summed up in the ideas that "they'll never
276 R. E. Reidenbach and D. P. Robin

know," "everybody does it," "we won't get caught," what was described as roudne safety equipment. In
and "there's no way anyone will ever find out." Rules addidon, many of the employees who worked
can be broken if there is an advantage in breaking around the vats were illegal immigrants from
them. If we are not caught, then who is to say it's Mexico and Poland (as was the case of Mr. Golab)
unethical? and did not speak English well. This hiring pracdce
At the basis of this culture is the philosophical was adopted, according to the tesdmony of a book-
posidon that business is not subject to the same rules keeper, because illegal aliens would be less apt to
that individuals are and that owners are the most complain.
important stakeholders. In essence, belief in a value- The response of FRS to the invesdgadon involved
less business environment produces a valueless busi- laying off workers and closing down the plant in
ness. mid-1983. The invesdgadon, and uldmate criminal
prosecudon of three FRS execudves centered around
FRS — A Portrait of the Amoral Corporation' Film the quesdon "Can two legidmate corporadons form
Recovery Systems, previously located in Elk Grove a third (niS), set it up to engage in a reckless and
Village, Illinois, exhibited many of the characterisdcs dangerous acdvity, ignore legal requirements — and
of an amoral organizadon. The company was organ- get off scot-free?" Prosecutors referred to the fTlS
ized to extract silver from old x-ray film which case as "novel" but qualified it by saying "It's an old
utilized a chemical process involving cyanide. Be- story of poor, uneducated people being exploited by
cause of the potendally acute toxicity of the process, people who were more educated, more privileged,
the safety of the workers should have been a princi- and more wealthy."
pal concem. This is a company whose formal culture valued
On Febmary 10, 1983, Stefan Golab, a worker at producdvity and profits. Costs, especially those that
FRS became weak and nauseated. He was working were morally Jusdfiable in caring for employees,
near a foaming vat of hydrogen cyanide. Fellow were not incurred. To do so would have reduced the
employees helped him outside and urged him to profitability of the company. Management operated
breathe deeply in the cold fresh air. At that point, on the basis that "we won't get caught" and "it's ok
Mr. Golab became unconscious and did not respond to break rules as long as we profit from it." Their
to efforts to revive him. He was rushed to a nearby regard for individuals is readily apparent in their
hospital where he was declared dead on arrival. hiring pracdces and their treatment of their employ-
Cause of death — cyanide toxicity. ees. Internally, employees were to obey rules which
The invesdgadon of this case reveals a company emphasized producdvity and failure to do so meant
that is typical of stage 1 organizadons. Inspectors dismissal and even perhaps prosecudon as an Olegal
from the Cook County Department of Environ- alien.
mental Control had previously cited the plant for 17
violadons that were labeled as "gross violadons" and
were ordered to be recdfied immediately. Typical of Stage two — the legalistic corporation
these violadons was a lack of a cyanide anddote,
legible warning signs, a respirator, and other safety Stage 2 is the legalisdc corporadon so named because
equipment that was judged to be mandatory for a of the preoccupadon the corporadon exhibits for
company engaged in this type of work. The plant compliance with the letter of the law as opposed to
itself, which was described as a "drab, one-story the spirit of the law. Organizadons in this stage
structure" contained 14-0 vats of foaming hydrogen exhibit a higher level of moral development than
cyanide among which the workers perfonned the organizadons in stage 1 because stage 2 cultures
extracdon process. Tesdmony of many of the work- dictate obedience to laws, codes, and reguladons, a
ers indicated that nausea, nose bleeds, and rashes value missing in the cultures of stage 1 organizadons.
were commonplace. That same tesdmony revealed Corporate values flow from the rules of the state,
that employees were ordered to remove the skull and that is why management is principally con-
and cross bones signs from the containen of cyanide cemed with adhering to the legality of an acdon
and that the owners of FRS had fiatly refused to buy rather than the morality of the acdon. "If it's legal.
corporate Moral Development Model 277

it's ok and if we're not sure, have the lawyers check it death of three teenagers who were struck from
out" typifies the operadng dictum of stage 2 organiz- behind in their 1973 Pinto. The gas tank of the Pinto
adons. More than just a desire to obey society's laws erupted, burst into flames, resuldng in the buming
— they take an intemal lawlike approach themselves. death of the three teenagers. A criminal homicide
The corporate legal staff operates as a check indictment was brought against Ford on the grounds
against wrongdoing as interpreted by legal statute. In that the auto company had engaged in "plain, con-
this culture, law equates with jusdce and there is no scious and unjustifiable disregard of harm that might
difference between what is legal and what is right result (from its acdons) and the disregard involves a
and just. The ethics of an action, if considered at all, substandal deviadon from acceptable standards of
is generally considered on a post hoc basis. conduct"
Codes of Conduct reflect this legalisdc thinking. In its defense. Ford's attomey, James F. Neal,
A 1989 ardcle on codes of ethics clustered codes into argued that the Pinto met all federal, state, and local
three categories (Robin et al, 1989). The largest government standards concerning auto fuel systems. This
cluster was one characterized by a "Don't do any- compliance. Ford's attomey further argued, was
thing unlawful or improper that will harm the comparable to other subcompacts produced in 1973.
organizadon," suggesdng the pervasiveness of this He condnued by saying that Ford did everything to
ethos. Cressy and Moore (1983) further suggest that recall the Pinto as quickly as possible as soon as the
most codes give the appearance of being legalisdc NHTSA (National Highway Traffic Safety Administra-
documents. It is perhaps not surprising that two of tion) ordered it to (emphasis added).
the largest tobacco companies, R J. Reynolds and Mark Dowie, then General Manager for Mother
Philip Morris, have legalisdc codes of conduct. These Jones, claimed that the Pinto was involved in 500
codes are very concemed with, and limited to, bum deaths and that buming Pintos had become
unlawful or improper behavior. such an embarrassment to Ford that J. Walter
The principal emphasis is sdll on profitability but Thompson, the ad agency that handled the Pinto,
the difference between stage 2 and stage 1 organiza- dropped a line from its radio spot that said, "Pinto
dons is that the latter is concemed with the legality leaves you with that warm feeling." Michael Hoffman
of the profits, not necessarily the morality of diem. raises an interesdng and certainly relevant point in
Owners are sdll the principal stakeholders. light of the mounting evidence of the Pinto's defec-
Contrary to the "win-at-all-cost" atdtude under- dve fuel system when he asks, "Even though Ford
lying organizadonal behavior in stage 1, stage 2 violated no federal safety standards or laws, should it
organizadons adhere to a nodon of reciprocity. That have made the Pinto safer in terms of rear-end
is, compliance with the law will produce good collisions, especially regarding the placement of the
results. By extension then, stage 2 organizadons are gas tank?" In Ford's lack of response to this quesdon
followers and not social leaders. Society can expect, and their steadfast refusal to recall their product
for the most part, organizadons that adhere to the voluntarily can be seen as one of the inhibiting
law but do little as far as operadng in their own effects of stage 2 behavior. Because of its preoccupa-
enlightened self interest is concerned. don with compliance to laws and reguladons,
cultural values focusing on what is right rather than
Ford motor of 1973- a portrait of the legalistic corporation^ on what is legal are either nonexistent or under-
While the notodous Pinto case has been dissected developed. As a consequence, the organizadon does
from numerous vantage points, far less attendon has only what it is required to do rather than what it
been focused on the defense that Ford Motor used in should do. This is symptomadc of the legalisdc
its behalf during the Elkhart, Indiana trial in 1980. In organizadon.
its defense can be seen many of the characterisdcs of Moreover, Ford's concern for the size of the
an organizadon in stage 2 of its moral development. bottom line rather than the morality of the bottom
It is important to point out that the Ford Motor line is evidenced in their cost-benefit analysis con-
Company of 1973 and not the Ford Motor Company tained in a report endded "Fatalides Associated with
of 1988, is cited as an example. Crash Induced Fuel Leakage and Fires." The $11 cost
The trial focused on Ford's culpability in the per car for the improvement designed to prevent gas
278 R. E. Reidenbach and D. P. Robin

tank ruptures was not cost effecdve. Ford estimated Studies indicate that about 75% of all U. S. firms
that benefits would run to $49.5 million, while the have codes of conducL Those same studies also
costs associated with the improvement would total indicate that the most common items mendoned in
$137 million. Stage 2 organizadons, like their coun- the codes are conflict of interest provisions, polidcal
terparts in stage 1, maintain a preeminent concem contribudons, use of insider informadon, illegal
for profitability, especially when it involves a trade- payments, bdbery and kickbacks, improper reladon-
off with doing what is right. ships, propdetary informadon, use of corporate
assets, gifts and favors, and unrecorded or falsely
recorded funds or transacdons, most of which, like
Stage three — the responsive corporation their stage 2 counterparts, have an intemal focus
designed to protect the organizadon (Raelin, 1987, p.
Unlike their legalisdc counterparts in stage 2, 177; Robin era/. 1989).
responsive corporadons begin to evolve cultures that Concem for other stakeholders begins to manifest
contain values other than producdvity and a sense of itself as managements being to realize the import-
legality. Responsive organizadons begin to strike a ance of employees and the community in which they
balance between profits and doing right. However, operate. Again, this nascent concem is not modve-
doing right is still more of an expediency rather than ated by a sense of doing dght for right's sake, but
an end unto itself Social pressures are such that these rather as a recognidon of the organizadon's greater
stage 3 corporadons must respond to those pressures social role.
or face censure or worse. The managements of these Movement from stage 2 to stage 3 is often
corporadons are more sensidve to the demands of initiated by outside events. Some potendally damag-
society than the managements in the previous stages. ing occurrence to the organizadon or other organiz-
Managements begin to recognize that the organiza- adons tnay happen forcing the organizadon to react
don's role exceeds a purely economic one and that it by countedng with some apparent ethical response.
has certain social dudes and obligadons. The intendon is to sway opinion of different state-
Codes of ethics take on greater importance and holders by doing good. A "do what we gave to do,
their focus begins to reflect a greater societal not because it's right but because it's expedient"
orientadon. As an example, consider the codes of dominates the responsive organizadon's ethical
ethics of the Bank of Boston, which are typical of system.
stage 3 organizadons. Among the codes include
standards, values, and prescripdons concerning P&G reacts to the Rely Tampon problem. The reacdon
integrity, confidendality, quaUty, compliance, con- that Proctor & Gamble made to the Rely Tampon
flict of interest, objecdvity, personal finances, problem is indicadve of an organizadon that has de-
decency, and accountability. The standard concern- veloped a stage 3 responsive level of tnorality. It is
ing social responsibility reads, "Seek opportunides to decidedly different from the type of thinking and
pardcipate and, if possible, to play a leadership role acdons one finds in the stage 2 legalisdc type of
in addressing issues of concern to the communides organizadon. P & G management made an enlight-
we serve." The major part of the codes, however, is ened decision to act in the best interests, not only of
still designed to idendfy behaviors that will bring themselves, but also with respect to a number of
potendal harm to the Bank of Boston (e.g., compli- different publics.
ance, conflict of interest, personal finances, con- In the summer of 1980, Proctor & Gamble was
fidendality). In that sense they are intemally directed. first made aware, by the Centers for Disease Control,
Concem for ethical conduct is evidenced in the that there might be a possible linkage between the
accountability statement which reads, "Report ques- incidence of toxic shock syndrome and the use of
donable, unethical, or illegal acdvity to your manager tampons. No indicadon existed that there was any
without delay" (Bank of Boston). It is interesdng to linkage between toxic shock and the specific use
point out that these codes were published at about of P & G's Rely product. During this same period
the same dme that the Bank of Boston pleaded of dme, P & G began an invesdgadon into the
guilty to charges of money laundering. alleged linkage. Inidal informadon indicated no rela-
Corporate Moral Development Model 279

donship between toxic shock syndrome and tampon however, moves the organizadon beyond a strictly
usage. legalisdc focus and, in some cases, has the effect of
On September 15, 1980, the Centers for Disease making the organizadon a social pioneer. SdU, it
Control informed P & G that in their study of 42 must be emphasized that cultures of stage three
cases of toxic shock syndrome, 71% of the women corporadons are dominated by a reacdve mentality,
were Rely users. This put P & G management in the not a proacdve mentality.
posidon of deciding to defend their brand against
what P & G sciendsts consdered rather sketchy
evidence. On September 18, 1980, three days after
the study results were announced, P & G made their Stagefour — the emergent ethical organization
decision to withdraw the product fi-om the market
and to halt producdon of Rely Tampons. The The emergent ethical organizadon is one in which
decision, according to Edward G. Harness, chairman management acdvely seeks a greater balance be-
and chief execudve of P & G, hinged on the tween profits and ethics. There is an overt efFort to
dilemma, "We didn't know enough about toxic manage the organizadon's culture to produce the
shock to act, and yet, we knew too much not to act." desired ethical climate. This change in the culture
(Gatewood and Carroll, 1981, p. 12) involves a recognidon of a social contract between
P & G had begun pulling 400,000 cases of their the business and society. Management approaches
product. Under an agreement with the FDA, P & G problem solving with an awareness of the ethical
was absolved of any violadon of federal law or consequence of an acdon as well as its potendal
liability for product defect. However, the remarkable profitability.
aspect of the response was yet to come. P & G One of the more visible manifestadons of stage 4
bought back all unused products, including $10 organizadons is the proliferadon of "ethics vehicles"
million in free promodonal samples. Moreover, they throughout the organizadon. Codes of conduct
voluntarily pledged research assistance to the Cen- become more externally odented and become living
ters for Disease Control for the study of toxic shock documents instead of lofty ideals to be read once and
and agreed to finance and inidate an educadonal then put away or highly limited rules that are
campaign about the disease. The educadonal cam- designed pdmarily to protect the organizadoa In
paign was remarkable in both the speed and the addidon, and typical of stage 4 corporadons, is that
scope of informadon disseminadon. handbooks, policy statements, committees, ombuds-
P & G management recognized the longer term men, and ethics program directors begin to reinforce
value of making this type of response. Although 20 the existence of codes. This signals stronger manage-
years of research and marketing expenditures were ment commitment to ethical behavior.
ded up in what would uldmately be a significant For example, at Boeing, an emergent ethical
loss, their acdon demonstrates a greater balance corporadon, greater CEO involvement in ethics, and
between profits and ethics than would be seen in line management involvement in ethics training
earlier stages of corporate moral development. programs are two aspects of their cultural concem
Cynics might respond that P & G did this out of for morality. In addidon, their ethics committee
economic reasons. In pan, that is probably tme. Yet, reports to the board and management has installed a
unlike Ford whose sole interests were economic, P & toll-free number for employees to report ethical
G recognized that their long term economic well- violadons.
being was inextricably intertwined with the morality General Mills has developed guidelines for deal-
of their decision. This is the hallmark of the respon- ing with vendors, compedtors, and customers.
sive organizadon. Recruiting focuses on the hidng of individuals that
Stage three is a pivotal point in the moral share the same cultural values and an emphasis on
development of most corporadons. It is a leaming open decision making hallmark their concem for
stage wherein managements test the eflficacy of ethical behavior.
socially responsive behavior and begin to understand While responsive corporadons begin to develop
the economic value of moral behavior. This atdtude. ethical mechanisms to increase the probability of
280 R. E. Reidenbach and D. P. Robin

ethical behavior, these organizadons are not yet fully Dynamics has recendy (1988) been indicted on
comfortable with their implementadon. Organiza- further charges of defense contractor fraud. The
donal acdons are still charactedzed by ad hoc process has been revised at General Dynamics to
attempts to develop and insdU organizadonal values. include a "squeal clause" which is designed to both
These attempts often lack direcdon in both the reward and protect employees who report on co-
selecdon of the values and their implementadon. workers who have broken company standards.
Top management recognizes the importance and Consider the following excerpts from Sara Lee's
value of this type of behavior but lacks the exped- codes which recognize the importance of balancing
ence and experdse to make it work effecdvely. profits and ethics:

Examples of emergent ethical organizations A growing Business has a role beyond the generation of profits. By
investing their good will, time, and money, companies
number of organizadons can be classified as the
can — and should — serve as catalysts in helping deal with
emergent ethicaL Boeing and General Mills were significant social issues.
cited earlier for their ethical efforts. Boeing's pro-
grams have been in place since 1964 but the mere Perhaps one of the best examples of the emergent
existence of ethical programs does not insure that ethical corporadon is that of Johnson & Johnson.
the emergent ethical organizadon will behave ethi- Johnson & Johnson is an advanced stage 4 corpora-
cally. In 1984, a unit of Boeing was cited for illegally don as suggested both by their CREDO and their
using inside informadon to secure a government acdons in the wake of the Tylenol tamperings. First
contract, a case of regression. consider the CREDO.
Often cited for unethical behavior. General The CREDO represents a strong balance between
Dynamics has an extensive ethics program. A publi- ethical concem and profitability. However, what
cadon by the giant defense contractor asks 10 really signals Johnson & Johnson as an advanced
quesdons about the program. These quesdons in- stage 4 corporadon is found in the response of one of
clude: their senior execudves who was asked about the
decision concerning the massive recall of Tylenol
1. Who is my Ethics Program Director? products. "We never really thought we had much of
2. How can the Ethics Director help me? a choice in the matter of the recall. Our Code of
3. How can I contact my Ethics Director? Conduct (CREDO) was such a way of life in thefirm that
4. Do I need my supervisor's permission to talk our employees, including me, would have been scandalized
with the Ethics Director? liad we taken another course (emphasis added). W e
5. How does the ethics hotline work? never seriously considered avoiding the cosdy re-
6. How do I know what Genera] Dynamics' ethics call." (William and Murphy, 1988).
standards really are?
What can be seen in all of these examples is
7. What is my responsibility if I become aware of
a management that is wrestling with a growing
someone who is violating the standards?
realizadon that the corporadon must develop a
8. What happens if I violate the standards?
mechanism to balance the organizadon's concern for
9. How does the ethics program apply to me?
profits and ethics. Some attempts are clumsy, some
10. What should I do if I am directed to do some-
work, some don't. What is important is that there is
thing that I believe is a violadon of company
among stage 4 organizadons a shift in the culture,
standards?
one that gives increasing emphasis to the morality of
The publicadon goes on to answer each quesdon. the bottom line.
For example, in response to the quesdon concerning
how an employee contacts the Ethics Director,
Stagefive — the ethical organization
General Dynamics has created a hotline complete
with answering machine. In addidon, the Ethics The final stage of organizadonal moral development
Director can be reached by mail, EMOS, or by direct is the ethical organizadon. We know of no examples
contact. of organizadons which have reached this level of
Does the system work? Not perfecdy. Genetal developmenL
Corporate Moral Development Model 281

Exhibit 1 Stage five behavior is characterized by an organi-


Johnson & Johnson's Corporate Credo zation-wide acceptance of a common set of ethical
values that permeates the organization's culture.
OURCRjEDO These core values guide the everyday behavior of an
individual's actions. Decisions are made based on the
We believe our first responsibility is to the doctors, inherent justness and fairness of the decision as well
nurses and patients,
as the profitability of the decision. In this sense there
to mothers and all others who use our products and services.
is a balance between concerns for profits and ethics.
In meeting their needs everything we do
Employees are rewarded for walking away from
must be of high quality.
We must constantly strive to reduce our costs
actions in which the ethical position of the organiza-
in order to maintain reasonable prices. tion would be compromised.
Customers' orders must be serviced promptly and accurately. At the heart of this organization is a planning
Our suppliers and distributors must have an opportunity system much like the one described by Robin and
to make a fair profit. Reidenbach (1987, 1989). The concept of a parallel
planning system wherein ideas and concepts fi-om
We are responsible to our employees, the normative moral philosophies are used in the
tbe men and women who work with us analysis of potential organizational activities.
throughout the world.
Everyone must be considered as an individual.
An example of parallel planning is seen in the
We must respect their dignity and recognize their merit. dehberation made Sir Adrian Cadbury's grandfather
They must have a sense of security in their jobs. (Cadbury, 1987). Sir Adrian's grandfather, then CEO
Compensation must be fair and adequate of Cadbury's was confronted with a profitable pro-
and working conditions clean, orderly and safe. position that he found morally repugnant. It con-
Employees must feel free to make suggestions cemed a contract to furnish English soldiers in the
and complaints. Boer War with a Christmas dn of chocolates. He was
There must be equal opportunity for employment, opposed to the war on moral grounds but was
development and advancement for those qualified. cognizant of the economic repercussions to his
We must provide competent management, employees that refusal of the contract would bring as
and their actions must bejust and ethical. well as the morale impact on the soldiers. His
decision involved producing the chocolate at cost so
We are responsible to the communities in which we live that his employees were compensated, the soldiers
and work and to the world community as well.
received the chocolate, but Sir Adrian personally did
We must be good citizens — support good works
not profit from a situation he found unethical.
and charities and bear our fair share of taxes.
We must encourage civic improvements In implementir^ the parallel planning system, the
and better health and education. organization may be viewed as a family with certain
We must maintain in good order ethical family values that guide decision making.
the property we are privileged to use, These core values can be translated into ethical
protecting the environment and natural resources. action statements such as:

Our final responsibility is to our stockholders. Treat customers with respect, concern, and honesty, the
Business must make a sound profit. way you yourself would want to be treated or the way
We must experiment with new ideas. you would want your family treated.
Research must be carried on, innovative programs developed
Make and market products you would feel comfortable
and mistakes paid for.
and safe having your own family use.
New equipment must be purchased, new facilities provided
and new products launched. Treat the environment as though it were your own
Reserves must be created to provide for adverse times. property (Robin & Reidenbach, 1987, p. 55).
When we operate according to these principles,
tbe stockholders should realize a fair return. What makes an ethical organizadon work is the
support of a culture that has a strong sense of moral
Johnson &Johnson duty and obligadon inherent within it. This culmre
282 R. E. Reidenbach and D. P. Robin

TABLE 1
A summary of the moral development of corporations

Stage in Moral Management Attitude Ethical Aspects of Corporate Ethics Defining Corporate
Development and Approach Corporate Culture Artifacts Behavior

Stage I Get away with all you Outlaw culture; Live No meaningful code of Film Recovery Systems;
The Amoral can; It's ethical as long as hard and fasq Damn the ethics or other
Organization we're not caught; Ethical risks; Get what you can documentation; No set Numerous Penny
c t r^
violations, when caught. and get out ofvalues other than itocK Companies
are a cost of doing greed
business

Stage 11 Play within the legal Ifit's legal, it's OK; The Code of Ethics, ifit Ford Pinto
The Legalistic rules; Fight changes that Work the gray areas; exists, is an intemal
Organization effect your economic Protect loopholes and document; "Don't do Firestone 500
outcome; Use damage don't give ground anything to harm the Nestle Infant Formula
control through public without a fighr. organization"; "Be a D I D U
relations when social Economic performance good corporate citizen" K.J. Reynolds
problems occur. A dominates evaluations Philip Morris
reactive concem for and rewards
damage to organizations
from social problems

Stage III Management understands There is a growing Codes are more P & G (Rely Tampons)
The Responsive the value of not acting concern for other externally oriented and
Organization solely on a legal basis. corporate stakeholders reflect a concem for Abbott Labs
even though they believe other than owners; other publics; Other Borden
they could win; Manage- Culture begins to ethics vehicles are
ment still has a reactive embrace a more undeveloped
mentality, A growing "responsible citizen"
balance between profits attitude
and ethics, although basic
premise, still may be a
cynical "ethics pays";
Management begins to
test and leam from more
responsive actions

Stage rV First stage to exhibit an Ethical values become Codes of Ethics become Boeing
The Emerging active concem for ethical part of culture; These action documents; Code
Ethical outcomes; "We want to core values provide items reflect the core General Mills
Organization do the 'right' thing"; Top guidance in some values of the organiza- Johnson & Johnson
management values situations but questions tion; Handbooks, policy (Tylenol)
become organizational exist in others; A statements, committees. ^ 1 r\
values; Ethical perception culture that is less ombudsmen are General Dynamics
has focus but lacks or- reactive and more sometimes used Caterpillar
ganization and long term proactive to social
planning; Ethics manage- problems when they Levi Strauss
ment is characterized by occur
successes and failures
1
Corporate Moral Development Model 283

Tahle I (Continued)

Stage in Moral Management Attitude Ethical Aspects of Corporate Ethics Defining Corporate
Development and Approach Corporate Culture Artifacts Behavior

Stage V A balanced concern for A total ethical profile. Documents focus on


The Ethical ethical and economic with carefully selected the ethical profile and
Oi^anization outcomes; Ethical analysis core values which core values; All phases
is a fully integrated reflect that profile. of organizational
partner in developing directs the culture; documents reflect them
both the mission and Corporate culture is
strategic plan; SWOT planned and managed
analysis is used to to be ethical; Hiring,
anticipate problems and training, firing and
analyze altemative rewarding all reflect the
outcomes ethical profile

has been designed and managed by top management This is unlikely to occur in the stage five organiza-
to produce the work climate necessary to support an tion. The ethical emphasis in the culture of the
assurance of the balance between profitabUity and organization is so strong that the individual is not
ethics. Reward systems are developed which support placed in a dilemma in which he or she must choose
individuals who make the "right" decision, even at the correct action. The correct action is always the
the expense of profitability. Sanction systems exist to just and fair action. Of course, organizations will
penalize and correct the behavior of those making a make mistakes in their planning. However, these
wrong decision. Ethics training is an ongoing con- mistakes, once identified, will be corrected so that
cem of the stage five organization, which integrates the final outcome corresponds ro an ethical out-
technical training with a focus on the morality of the come.
job. Hiring practices emphasize not only the aptitude
and skill of the potential employee but also how that
employee is likely to behave in moments of stress. Some concluding comments
An organizational mentor program exists with the
purpose of providing work and moral guidance for Organizations are struggling with their records of
the new employee. This parallel system wherein ethical behavior. This struggling is indicative of
profits and ethics go hand-in-hand is the hallmark moral growth where in organizations move firom
of the ethical organization. one level of moral development to another.
The principal difference between stage four and This conceptual model of organizational moral
stage five organizations is seen in the commitment development identifies five stages of growth. Table 1
that the organization makes to ethical behavior. summarizes the salient features of this development
Stage four organizations have not fully planned for process. Not all organizations vwill evolve to the
and integrated ethical values throughout their cul- highest stage. And, not all organizations begin at
ture. Instead, they rely on mechanisms to guide stage 1. It is our opinion that most organizations are
ethical behavior. There is still an imbalance between currently in the legalistic and responsive stages of
the goals of profitability and ethics so that in times moral development. More and more organizations,
of stress, it is not uncommon to see the pursuit of however, are beginning to manifest the characteris-
profitability produce unethical behavior. It is here tics of stage four oi^anizations. Corporate emphasis
where an organization in stage four, in spite of the on profitability still far outweighs concem for ethics.
ethics vehicles existent in an organization, can Moreover, many managements have not yet learned
regress to an earlier stage of moral development that corporate cultures can be managed to produce
284 R. E. Reidenbach and D. P. Robin

the desired etbical behaviors. What we are seeing are Moral Ideology', in L W. Hoffman, ed.. Review of Child
cultures that are unmanaged, and when unmanaged, Development Research (Russell Sage Foundadon, New
evolve in their own directions, usually in the direc- York).
tion pointed .out by the reward system. Thus, , 1976, 'Moral Stages and Moralization: The Cognitive
cultures devoid of ethical concerns or in which Development Approach', in T. Lickona, ed. Moral
ethical values are absent, will normally grow in the Development and Behavior: Theory Research and Social Issues
direction of productivity and profitability, two (Holt Rinehart & Winston, New York).
Raehn, J. A.: 1987, 'The Professional as the Executive's
values typically embraced by management.
Ethical Aide-de-Camp', The Academy of Management
While the conceptual model presented in this
Executive 1, No. 3, pp. 171—182.
article requires confirmation and possible respecif- Robin, D. P. and R. E. Reidenbach: 1987, 'Social Responsi-
ication, it represents a start in the study of the bility, Ethics, and Marketing Strategy: Closing the Gap
dynamics of corporate moral development. Further Between Concept and Application', foumal of Marketing
study is sure to provide a clearer view of the process Qanuary).
by which organizations change and develop their , 1989, Business Ethics: Where Profits Meet Value Systems.
own moral characters. Ei^lewood Cliffs, NJ: Prentice-Hall.
Robin, D. P., M. Giallourakis, F. R. David and T. E Moritz:
1989, 'A Different Look at Codes of Ethics', Business
Notes Horizons Qanuary—February).
Sathe, V.: 1985, Culture and Related Corporate Realities.
Homewood, IL: Richard D. Irwin.
' Abstracted from McClory, Rj 1986, 'Murder on the Shop
Schein, E J 1983, 'The Role of the Founder in Creating
Floor', Across the Board (June), pp. 29.-32.
Organizational Culture', Organizational Dynamics 12, No.
^ Abstracted from Hoffman, W. M.: 1984, T h e Ford Pinto',
1, pp. 13-28.
in W. M. HofFman and J. Mills Moore (eds.). Business Ethics
(McGraw-Hill Book Co., New York). Schwartz, R and S. M. Davis: 1981, 'Matching Corporate
Culture and Business Strategy', Organizational Dynamics
(Summer), pp. 30—48.
Trevino, L. K.: 1986, 'Ethical Decision Making in Organiza-
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