Fall 1999

We regularly read in the papers or hear on the evening news about ethics violations in organizations--illegal behavior that runs the gamut from high-level managerial shenanigans such as insider trading to unacceptable personal behavior such as sexual harassment. Companies are spending millions of dollars every year on programs to "manage" ethics in the workplace. Just what is influencing these organizations to engage in ethics initiatives? And, do these programs actually accomplish their objectives?

These questions drive the research of Gary Weaver, assistant professor in the Department of Business Administration. With dual doctoral degrees in philosophy and business, he is uniquely positioned to examine how individuals and organizations deal with the manifold pressures and ambiguities that can lead to ethical problems.

"I look at the way organizations try to create an environment that encourages good behavior and discourages bad behavior," says Weaver. "In recent years, much attention has been directed at companies' efforts to foster legal and ethical behavior--by the government, in the popular press and even on the grapevine of the business world. Today, just about every American company has some sort of formal policy document or code of ethics. Many companies go further, devoting full-time staff to ethics management and even hiring an ethics officer. But, although companies are deeply involved in these activities and spending substantial sums on their implementation, there has been little formal evidence regarding their outcome. Do such programs really work?"

By surveying the landscape of the business world, Weaver and his associates, Linda Kleve Treviño and Philip L. Cochran at Pennsylvania State University, discovered a number of factors leading organizations to adopt ethical inititatives. In the late '80s and '90s, Congress revamped the U.S. Sentencing Commission guidelines, stiffening the penalties for violations of federal law and adding a "corporate death sentence" provision whereby an organization could be put out of business. The guidelines, however, provide a leeway that allows judges to reduce the fines of guilty companies viewed as actively trying to instill ethical behavior in their employees. Likewise, fines can be significantly increased for companies with no ethics policies in force. Media scrutiny is also intense, and ethics scandals can quickly become front-page news.

"Every company today has an incentive to try to proactively manage ethics," Weaver says. "But what they do and how they do it has a tremendous effect on the results." In analyzing how organizations attempt to manage ethics, the first step is simply to look at the number of different formal initiatives in place. The next step is to look at how such programs are implemented. "In some organizations, the ethics program looks somewhat like an internal police force," Weaver explains. "It focuses on preventing, detecting and punishing improper behavior." In contrast, other companies emphasize shared aspirations and values.

Weaver suspected that two such widely differing approaches would have different results. Adding to the equation was the attitude of the organization toward the ethics programs. "If the ethics program consists merely of sending memos from the corporate offices a few times a year, it can easily be made into window dressing. What then are the behavioral effects when contrasted to a company in which ethics are deeply integrated into everyday organizational activities?"

Weaver's ongoing research examines the outcome of ethics programs. "We consider the components of a company's program, and we try to establish a relationship between the formal ethics program and certain desirable outcomes," he says. The ethical reputation of the company is important to employees, Weaver adds. In one company, after a management scandal broke in the headlines, employees who once wore their uniforms to and from work switched to wearing street clothes.

Some of the results have been surprising. "In general, employee attitudes and behavior are more positive with a formal ethics policy in place. Although the results are greater when the orientation is values-focused as opposed to strictly compliance-focused, we discovered that the most successful programs include both," says Weaver. "Employees want a set of values and ideals that they can aspire to, but they also expect justice to be upheld in the organization."

Weaver's research also shows that some employees regard their company's ethics program as a blame-shifting device. "Although we've not encountered a senior manager who says that the ethics program is a form of 'executive liability insurance,' in some organizations some employees perceive it in this way," he says. "Obviously, the outcome under these circumstances will not be positive."

Weaver and his colleagues have presented their findings in academic and corporate venues. Most recently, they addressed The Conference Board's annual ethics meeting and the Washington, D.C.,-based Ethics Resource Center. Their studies, which have been supported by the American Institute of Certified Public Accountants and by Arthur Andersen, have been cited in The Wall Street Journal and other media.

"Ethics is a hot topic because of the legal issues, the media scrutiny and the pressures that come with corporate downsizing," Weaver says. "But it is a difficult subject to research. Our first data collection was relatively easy because we were asking companies about the types of formal programs that they had in place. The second effort, however, asked companies to let us survey their employees, and many companies were reluctant to participate. It's a difficult subject for many companies to discuss."

Weaver's long-term goals are to examine how ethical issues are handled in an increasingly global environment, where differences in policy pressures and in cultural expectations arise. "We need to develop ways to understand and deal with business ethics that are appropriate across multiple cultural settings," Weaver says.