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The Methods Used to Implement an Ethical Code of Conduct and Employee

Attitudes

Article  in  Journal of Business Ethics · October 2004

DOI: 10.1007/s10551-004-1774-4

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The Methods Used to Implement an
Ethical Code of Conduct and
Employee Attitudes
‘‘Recent events concerning unethical
business practices not only in Wall Street but
also in many other places appear to highlight
the lack of attention to implementation of
ethical policies (Murphy, 1988)’’.
ABSTRACT. In the process of implementing an ethical
code of conduct, a business organization uses formal
methods. Of these, training, courses and means of
enforcement are common and are also suitable for self-
regulation. The USA is encouraging business corporations
to self regulate with the Federal Sentencing Guidelines
(FSG). The Guidelines prescribe similar formal methods
and specify that, unless such methods are used, the process
of implementation will be considered ineffective, and the
business will therefore not be considered to have complied
with the guidelines. Business organizations invest enor-
mous funds on formal methods. However, recent events
indicate that these are not, by themselves, yielding the
desired results. Our study, based on a sample of 812
employees and conducted in an Israeli subsidiary of a
Dr. Avshalom M. Adam is a Lecturer in the College of
Management, MBA School; and in the Open University,
MBA School, Israel. His research is in the following subjects:
theory and praxis of ethics, in business, in the environment,
and in social and public policy. He is a Visiting Scholar at
Stanford University (2003/4) continuing the research he
conducted last year (2002/3) at UC Berkeley completing a
research paper: ‘‘Sustaining humans and spaceship earth:
The ethical toolbox.’’
Dr. Daila Rachman-Moore is the Associate Dean for Academic
Affairs and Senior Lecturer in the College of Management,
Academic Studies, Israel, in the School of Business Ad-
ministration in the following subjects: Advanced Quantitative
Methods; HRS, HRM. Special areas of interest are HR
Selection and Performance Management. She has Active
interest in the area of HR Strategy, especially in the core
values of organizations.
Journal of Business Ethics 54: 225–244, 2004.
Ó 2004 Kluwer Academic Publishers. Printed in the Netherlands.
Avshalom M. Adam
Dalia Rachman-Moore
leading multinational High-Tech corporation headquar-
tered in the US, indicates that, of the methods used in the
process of implementation, one of the informal methods
(namely, the ‘‘social norms of the organization’’) is per-
ceived by employees to have the most influence on their
conduct. This result, when examined against employee
tenure, remains relatively stable over the years, and stands
in contradistinction to the formalistic approach embedded
in the FSG. We indirectly measure the effectiveness of the
percieved most influential implementation process meth-
ods by analyzing their impact on employee attitudes
(namely, ‘‘personal ethical commitment’’ and ‘‘employees’
commitment to organizational values’’). Our results indi-
cate that the informal methods (‘‘manager sets an example’’
or ‘‘social norms of the organization’’) are likely to yield
greater commitment with respect to both employee atti-
tudes than the formal method (‘‘training and courses on the
subject of ethics’’). The personal control method (‘‘my
own personal values’’) differs significantly from all the other
methods in that it yields the highest degree of ‘‘personal
ethical commitment’’ and the lowest degree of ‘‘employ-
ees’ commitment to organizational values.’’
KEY WORDS: code of ethics, commitment, compli-
ance, employee attitudes, federal sentencing guidelines,
formal, informal and personal controls, human resources
development, implementation process, social norms,
training of employees
Introduction
The first aim of this article is to detail the desired
methods to be used in the process of implementing
an ethical code of conduct. Academics, managers of
business corporations and policy makers generally
hold differing views regarding the best process
through which to implement ethical codes of
conduct. Policy makers tend to favor formal
226 Avshalom M. Adam and Dalia Rachman-Moore
methods whereas academics prefer a mixture of
formal and informal methods. Though varied in
their approach, managers of business corporations
generally establish an ethical code of conduct,
through a process that contains a variety of formal
methods aimed at regulating employees’ conduct.
The work environment is one in which the
establishment of an ethical code of conduct or
ethical program is now considered an integral part
of the success of business corporations (Paine,
2003).
In recent years, in Europe, Australia and the USA,
there has been a large increase in the number of
corporations choosing to adopt an ethical code of
conduct (Adams et al., 2001; Kaye, 1992; Post et al.,
2002; Reynolds, 2000; Somers, 2001). This has oc-
curred partly because it is good managerial practice
(Paine, 1996, pp. 477–478) with respect to both
internal and external stakeholders (Murphy, 1988;
Treviño and Nelson, 1999), and partly, in the USA,
as a result of federal legislation (Weaver et al., 1999).
In addition, multinational organizations also use the
ethical code of conduct as an instrument to guide
ethical decision-making processes so as to over-rule
differences in the ethical norms of employees from
different cultures (Robertson and Fadil, 1998).
Business corporations spend enormous funds on a
range of formal methods used in the process of ethical
code of conduct implementation (designing the
code, training, courses, means of enforcement, etc.).
Yet, unethical business practices on a large scale are
still committed, even by business corporations that
have adopted an ethical code of conduct and estab-
lished it by formal methods in their corporations.
Enron and WorldCom are the most recent examples
(Paine, 2003).
Some business mangers establish an ethical code of
conduct for the sake of appearance and for its utili-
tarian value in deflecting criticism and enquiry into
their unethical practices. In other instances, managers
have limited the process of implementation to a few
formal methods that fail to address their businesses’
underlying unethical culture. Regardless, the nega-
tive impact of unethical practices on market stability
is impeding the economy, and restoring public trust
has become an elusive target. The unethical practices
of some business corporations have contributed to a
sense of great uncertainty in the trade system and in
the inadequacy of its course. The former may be
illustrated by the failure of the stock market to attract
back investors and the later by the introduction of
regulation mechanisms (viz., Sarbanes-Oxley Act,
2002) which re-examine and re-assess the account-
ing of the business organization. Restoration of
market trust is not a trivial task. While no one dis-
putes that unethical business practices remain an
obstacle to the necessary trust required for the con-
duct of trade, the question remains as to whether
policy makers offer the necessary tools to harness
business conduct. Furthermore, there is little litera-
ture on the effectiveness of ethical codes of conduct
(Somers, 2001; Stevens, 1994). Nevertheless,
McKendall et al. (2002) argued that, although busi-
ness corporations were adopting ethical codes of
conduct and employing formal implementation
methods (i.e.. ethical compliance programs), this did
not lessen their legal violations. The paper criticized
the lack of positive contribution from the USA’s
Federal Sentencing Guidelines (FSG) to changing
the ethical practices of business corporations. These
guidelines suggest formal methods (formal controls)
for use in implementing an ethical code of conduct.
Furthermore, organizations that adopt the suggested
formal methods are considered to have done their
best to implement such a code. Implicit in such an
approach is the assumption that formal controls
successfully influence organizational members’ ethi-
cal conduct.
This article does not discuss the compliance
program offered by the FSG, but rather focuses on
the acts of a self-regulating business corporation and
its ethical code of conduct implementation process.
In particular, this article discusses how a particular
organization implements its values and ethical code
of conduct, and how its employees perceive the
influence of the formal, informal and personal
methods used in the implementation process.
The second aim of the article is to indirectly
measure the relative effectiveness of the diverse
methods used in the implementation process by
comparing the results relating to employees’ per-
ceptions of the methods used in this process with
their attitudes towards behaving ethically and
enacting the organization’s values.
The structure of this article is as follows. First, we
review the various methods used in the implementa-
tion process, in their context. We then discuss the re-
search method, with an overview of the organization’s
 An Ethical Code of Conduct and Employee Attitudes
documents, a brief summary of interviews with
employees, and a report of our discussions with HR
representatives. In the third part of the paper, we de-
scribe the method we used. We then present and
analyze the results. A discussion of the results in terms
of the research questions follows, and we conclude
with suggestions for further research. It should be
noted that, although we investigated implementation-
process methods with respect to implementation of
organizations values and ethical code of conduct, the
use of such a process or methods is not limited to this
context. Indeed, similar methods and processes are
commonly applied to implement a variety of behav-
ioral standards, such as those addressing environmen-
tal, health and safety issues.
The implementation context
The design of the process of implementation of an
ethical code of conduct may be viewed as an outcome
of the application of specific principles prescribing
formal methods, such as training, courses and means
of enforcement. Similar principles were set by the
federal regulators. Policy makers designed the US
Federal Sentencing Guidelines as a mechanism that
aimed to improve the legal compliance of business
corporations through self-regulation. Though the
FSG does not mention an ‘‘ethical code of conduct’’
by name as a mechanism of self-regulation, it has been
understood and interpreted as suggesting this form of
control (Izraeli and Schwartz, 1998; McKendall et al.,
2002). The FSG specifies a set of formal methods that
business organizations may use, and against which the
US courts assess penalties in federal criminal matters,
with a base fine attuned to a corporation’s ‘‘culpa-
bility score.’’ The chief mitigating circumstance is
that the organization has adopted an ‘‘effective’’
compliance program. A compliance program is not
judged to be ‘‘effective’’ unless it adheres to seven
conditions (FSG 8A1.2 (k)). These conditions cor-
respond to formal controls that may be translated into
formal methods to be used by business organizations
in the process of implementing an ethical code of
conduct.
During the period in which the FSG was designed
(it was enacted in 1991), Murphy (1988) published a
paper on the subject of the desired methods for use
in the process of implementing business ethics.
227
According to Murphy, implementing business ethics
in an organization (not unlike implementing an
organization’s strategy) ought to be part of a
meticulous change in its policies that is embedded
into the workplace routines. He distinguishes be-
tween the ‘‘formal organization’’ and the ‘‘informal
organization’’ and recommends that these two as-
pects of the organization be intertwined. Murphy
considers the ‘‘formal organization’’ to consist of
three parts: (1) a ‘‘corporate ethical code of conduct’’
(which ought to be ‘‘specific,’’ ‘‘blunt,’’ put in
‘‘public documents,’’ and ‘‘revised periodically’’ to
reflect responses to changes); (2) ‘‘committees,
conferences and training,’’ and (3) ‘‘ethical audits
and questions.’’ He defines the ‘‘informal organiza-
tion’’ to be the organization’s culture, which thrives
in the public sphere, and should be (1) ‘‘open and
candid’’ and (2) entail management setting an
example and instructing subordinates. The design of
the execution of an ethical code of conduct should
be done ‘‘top (the CEO) down.’’ Thus, the formal
side of Murphy’s approach to implementing business
ethics is in line with the FSG. However, in contrast
to the FSG, he also elaborates on informal methods.
Other academics studying the context within
which ethical codes of conduct are implemented
discuss diverse methods that ought to be used by the
organization and the ways in which they may be re-
ceived by organizational members. These methods
may be grouped into three categories: formal, infor-
mal, and personal. Formal methods (or ‘‘controls’’)
include training and courses on the subject of ethics,
means of enforcement, conferences and ethics offi-
cers. Informal methods include the example set by a
manager and the social norms of the organization
(Murphy, 1988; Treviño et al., 1998). Finally, the
personal method encompasses controls that lie with
the individual, rather than the organization, e.g.,
individuals’ personal ethical standards (Laufer and
Robertson, 1997).
Few studies (Fritz-Harden et al., 1999; Treviño
et al., 1998) have measured the influence of formal,
informal or personal controls on the conduct of
organizational members or their attitudes. Formal
and informal (social) controls may effectively influ-
ence the behavior of an organization’s members
when they are manifested through the conduct and
attitudes of managers and employees (Casell et al.,
1997; Laufer and Robertson, 1997).
228 Avshalom M. Adam and Dalia Rachman-Moore
Formal methods
Organizations may employ diverse mechanisms of
control, ranging from documents that specify the
ethical code of conduct, which are used in the
course of training, through the evaluation of em-
ployee performance, to enforcement procedures.
Some controls, e.g. those used in the selection and
recruitment routines, appear early in the process of
evaluating candidates’ actions and attitudes. This
may be viewed as the first use of formal controls, a
stage that is followed by employee training during
the orientation period. All three routines (recruit-
ment, selection and training) may be viewed as a
crucial part of employees’ socialization in their first
year of membership of the organization (Casell et al.,
1997, p. 1082; Laufer and Robertson, 1997).
Informal methods
These methods are not mentioned by the FSG,
though they may play an important role in the
socialization process. In the social frame of refer-
ences, ‘‘the other(s)’’ may play a major role as
‘‘sources of, or references for, ways of thinking,
feeling, perceiving and evaluating, and as audiences
which may be physically present or absent in any
interaction, but towards whom an actor orientates
his/her conduct’’ (Casell et al., 1997). Mechanisms of
informal control may include a social dimension
through which superiors regulate the behavior of
subordinates, or employees regulate the behavior of
their peers, through everyday interaction with one
another in accordance with the organization’s norms
or values (Casell et al., 1997; Treviño and Young-
blood, 1990). Within this context, informal methods
such as the social norms of the organization may reflect
the organization’s values and rules of ethics. An
organization’s members may be coerced by other
members of the group, peers or superiors, to conform
to the social norms; if not, they run the risk of dis-
approval or even rejection. Indeed, the social group
exerts pressure on the individual to conform to the
norms, however, to a limit (Laufer and Robertson,
1997). The relationships between superiors and
subordinates, or between a superior and a team, or
between peers may develop in non-formal meetings
(e.g., coffee breaks, lunches or exercises together in
the gym). The social norms of the organization play a
role; some say a major role, in setting its social order
(Laufer and Robertson, 1997). Some sociologists
suggest that ‘‘interaction between members of a so-
cial unit tends to be orderly because the vast majority
of members subscribe to the same evaluation of
conduct, meaning that they hold the same beliefs as
to what conduct ought to be’’ (Gibbs, 1981, p. 1).
Still another example of an informal method may
be labeled the example set by the manager. It is a part of
the formation of the manager–subordinate relation-
ship. This is displayed in the influence of the man-
ager’s behavior (or lack thereof) on the behavior of
his/her subordinates. The example set by the man-
ager may be a tool advocated by the philosophy of
the organization. Research indicates that the influ-
ence of the example set by the manager on the
subordinates’ behavior is crucial in the formation of
the behavior of the latter (Post et al., 2002; Schein,
1992). Further, this is one of the roles managers are
expected to perform, that is, as role models. The
manager can set an example for ‘‘proper and desir-
able behavior’’ for the employees to imitate (Yukl,
2002, p. 150). As such, the manager as a role model
may be viewed as a dimension of the social context
(Casell et al., 1997).
Personal method
This method has been conceptualized as an assertion
that an individual is able to effect a change in the
organization (Greenberger and Strasser, 1986). It may
reflect the influence of the culture, norms and poli-
cies of the organization as well as ego-control (Laufer
and Robertson, 1997). As a result of such influences a
sense of ‘‘personal control’’ is attained. The interface
of each member of an organization with its processes
underpins individual behavior (Casell et al., 1997, p.
1085). The issue at stake is how members of the
organization perceive, receive and respond to the
methods used in the implementation process. In
addition, the personal method may reflect the per-
sonal values of an organizational member, acting as
the screen through which an individual filters other
values. Although the sources of personal self-control
vary, they may be derived from values shared by
family, community, religion etc.; values with which
an agent identifies. In general, members of the
 An Ethical Code of Conduct and Employee Attitudes
organization ought to comply with its ethics (Laufer
and Robertson, 1997). Thus, in the process of
implementation, the members of the organization do
not remain passive. The influence of the diverse
methods on the conduct of organizational members
is, therefore, contingent on the interpretive and
evaluative process undertaken by individuals in the
organization and on their organizational roles (Casell
et al., 1997, p. 1077; Treviño et al., 1998).
Research questions
With respect to formal and informal methods that
are used in the process of implementing an ethical
code of conduct, little empirical research has been
conducted to measure (either directly or indirectly)
the effectiveness of their impact on organizational
members’ behavior (Casell et al., 1997; Weaver
et al., 1999). Casell et al. (1997) and Weaver et al.
(1997) encourage researchers to empirically examine
the role of the diverse methods used in the imple-
mentation process. Therefore, given the existing
absence of empirical data, we aim to explore the
process of implementation through a set of research
questions and their presuppositions.
RQ1: Which of the methods used in the process of
implementation do employees perceive as
most influencing them to behave in accor-
dance with organizational values and rules?
Weaver et al. (1999), in their research into the
process of implementation of an ethical code of
conduct, limited their study to formal controls. By
contrast, Treviño et al. (1998) discussed both
informal and formal methods and considered their
influence on regulating ethical behavior and their
impact on employee attitudes. Casell et al. (1997)
scrutinized the conception of formal methods,
informal methods and personal control within the
social nexus of the organization. We wished to
examine not only how formal and informal controls
are applied, but also how they are received, the re-
sponses they elicit within the social milieu of the
organization, and how members of the organization
perceive the methods to influence their conduct.
The different methods are embedded in an
implementation process that is effected over time.
229
However, little research has been undertaken with
respect to the effect of time on employee’s percep-
tions of the influence of the various methods.
RQ2: What is the relationship between employee
tenure and the method employees perceive as
most influencing them to behave in accor-
dance with organizational values and rules?
An indication of the effectiveness of the ethical code
of conduct implementation methods may be ob-
tained by examining their relationship with relevant
employee attitudes.
RQ3: What is the impact of the methods that are
perceived as being most influential in the
process of implementing the organizational
ethical values and rules on employee attitudes?
This question is of importance because the various
implementation methods may differ in their impact
on employee attitudes towards behaving ethically
and enacting the organization’s values. If so, the
organization may benefit from discovering which of
the methods better impact on ethical and pro-social
behavior. The answer to this research question may
also serve as an indirect measure for the relative
effectiveness, in terms of employee attitudes, of the
different implementation methods, be they formal,
informal or personal.
Research of relevance to our question has been
conducted by Meyer and Allen (1997), Treviño
et al. (1998) and Fritz-Harden et al. (1999). Meyer
and Allen suggested that one of the keys to affective
commitment to an organization and its values may
be based on: ‘‘the desire to establish a rewarding
relationship with an organization and/or on con-
gruence in the goals and values held by the indi-
vidual and the organization’’. One of the several
affective commitment antecedents that they re-
searched was ‘‘just and fair treatment’’ of organiza-
tional members, displayed through the organization’s
policies and practices. Just and fair treatment yields
higher affective commitment to organizations that
practice it than to those that display a lack of it.
Treviño et al. (1998) and Fritz-Harden et al.
(1999) analyzed the effect that methods used in
the process of implementation had on employees’
affective commitment to their organizations.
230 Avshalom M. Adam and Dalia Rachman-Moore
Treviño et al. (1998) indicated that the stronger an
organization’s ethical culture, the greater the level of
affective commitment towards it. Fritz-Harden et al.
(1999) indicated that, at all organizational levels,
either the example set by the manager or adherence
to organizational ethical standards is the strongest
predictor for affective commitment.
However, overall, the literature regarding how an
ethical code of conduct can be incorporated effec-
tively into corporate processes and routines is sparse
and, thus, our question is exploratory.
Background to the research method
We conducted the research in an Israeli subsidiary of
a leading multinational High-Tech corporation that
is headquartered in the US and that implements an
ethical code of conduct. We obtained preliminary
consent and specific terms for the study from the
CEO. We began the study with a brief, exploratory
qualitative survey of the organization. This included
review of the organization’s documents to obtain an
overview of the organization’s structure and the
formal methods used to implement its ethical code of
conduct. We then conducted interviews with 10
employees to gain information on both formal and
informal implementation methods. At each stage of
the research, we held meetings with Human Re-
sources (HR) representatives to clarify our under-
standing of the data thus collected. The documentary
and oral data collected are summarized below.
The organization’s documents: summary and brief analysis
The organization’s formal methods were detailed in
two groups of documents: (a) documents relating to
the ethical code of conduct, including training routines,
the organization’s set of values and its employee
orientation program; and (b) documents relating to
Performance Evaluations, with respect to the perfor-
mance of both the organization (through means of a
survey of organizational health (SOH)) and its
employees.
Ethical code of conduct-related documents
Senior managers have the role of presenting the
ethical code of conduct to new employees during
their first week of work. The code is divided into
three parts: corporate policies and standards, a hand-
book on business conduct that specifies the demanded
level of compliance, and guidelines for making dif-
ficult decisions. The principles underpinning the
code of conduct, to which employees ought to ad-
here, are ‘‘uncompromising integrity’’ and ‘‘profes-
sionalism.’’ This document, which specifies to the
employee the ethical guidelines of the work place, is
the means by which the organization’s moral values
and rules are made known to the employee. The
degree of importance attached to it by the organiza-
tion is indicated by the fact that it is presented to new
employees by a senior manager. The examples pro-
vided in the code provide a venue for discussion of
questions regarding the application of the organiza-
tional values and rules to day-to-day work situations.
The set of values that pertain specifically to the
company’s manufacturing plant are specified in a
separate document that specifies the values under-
pinning desired conduct in that work environment.
These values are related to the organization’s culture
of ‘‘results orientation,’’ and to its subculture (the
ethical culture of the organization) of ‘‘integrity’’
and ‘‘respect to people.’’
A third document details the employee orienta-
tion program. It introduces new employees to the
manufacturing plant by presenting an overview of
the plant, its unique language and culture. This
document also specifies the orientation program’s
structure and time-table from the first week at work,
in several sessions that are dedicated to a discussion
of the culture of the manufacturing plant. It specifies
the basic values of the corporation, of which some
are ethical values; the full list is as follows: ‘‘mutual
respect,’’ ‘‘commitment to providing good customer
service,’’ ‘‘leadership,’’ ‘‘uncompromising integrity
and fairness,’’ ‘‘result orientation,’’ ‘‘quality of
work,’’ ‘‘excellence,’’ and ‘‘creativity.’’
Performance evaluations
The organization assesses its own health, in terms of
administrative processes and the relationship between
employees and other organizational stakeholders,
through the SOH that is distributed to all employees
on an annual basis. The SOH also taps into the ethical
behavior of the members of the manufacturing plant.
It measures the extent to which employees’ are
aligned with the organization’s culture and ethical
 An Ethical Code of Conduct and Employee Attitudes
subculture, and so sheds light on how well the
organization’s values and rules are accepted.
Employee performance is also assessed, through
annual reviews conducted on each employee by
peers and superiors using evaluation criteria that
include the organization’s business and ethical val-
ues. Thus, it offers employees both positive feedback
and a list of suggested improvements, so reinforcing
to employees the importance of achieving the code
of conduct’s desired level of conformity. Perfor-
mance evaluation results determine the status of
employees and their future prospects, thus this phase
acts as a means of enforcing compliance.
Interviews with employees
In addition to studying the documents, we con-
ducted a brief set of informal interviews with 10
employees to explore, by means of open-ended
questions, the diverse methods used in the process of
implementing the ethical code of conduct. Rather
than use a random sample of employees, the HR
Department selected participants for these inter-
views. Therefore, although the variance in the an-
swers was small, it could not be determined whether
responses were representative of the organization’s
entire workforce.
The series of interviews provided an indication of
the employees’ perceptions of the diverse methods
used in the process of implementing the code, and
the relationship these methods may have, if any,
with employee attitudes towards the organization’s
ethical values and rules. We used these findings to
gain preliminary insight into employees’ under-
standing of the ethical code of conduct.
As a result of the open-ended manner in which
we interviewed these employees, we also received
answers to questions we did not ask them, such as,
how does the ethical code of conduct become
known. Interviewees suggest that it becomes known
in a variety of ways, of which training and courses
emerged as the main source of knowledge. The
interviewees also explained the ways in which the
code is accepted and/or complied with by different
members of the organization. Employees that do not
comply leave of their own choice or are terminated.
Some employees remain ambivalent and comply
with the code merely out of a sense of formal
231
obligation, whereas other employees embrace the
code and identify with it. Some of those who fully
embrace it do so because they tend to see it as
improving the quality of the workplace. Intervie-
wees reported that the ethical code of conduct ap-
plies to relationships between employees as well as
with various stakeholders, in addition to addressing
matters such as how people should execute their
work assignments, attend and arrive at work etc.
The general approach to work, that is, the
accountability of an employee, is derived from the
organization’s ethical culture. This can be elucidated
by examining both what people refrain from doing
(e.g., not entering into pornographic web sites, not
engaging in sexual harassment) and from what they
do (e.g., giving an honest account of the work that
they have done). The preceding examples were
considered by interviewees to correspond with the
organization’s social norms. The interviewees report
that there is common knowledge as to the accepted
rules by which employees are supposed to behave, of
which some are unwritten rules that, if not adhered
to, result in possible consequences such as the dis-
approval of their peers or managers, up to termina-
tion of contract.
From the interviews we learned about the role of
formal and informal controls in shaping the conduct
of employees. The responses of the interviewees
pointed to the significance of the processes of em-
ployee orientation and performance evaluation in
the implementation process of the ethical code of
conduct within the organizational culture. In most
interviews, the employee orientation program was
noted as an important vehicle for the introduction of
the ethical code of conduct, affecting employees’
outlook on their organization. The process of per-
formance evaluation was considered instrumental in
enhancing workers’ perceptions of the ethical code
of conduct, particularly, since it addresses the issue of
the extent to which employees follow the organi-
zation’s values. It results either in rewarding
employees through promotion in rank, which may
result in increased salary, or in punishing them
through lack of rank promotion or no increase in
salary. Since, built into the process, there is a con-
ditional incentive or a conditional retribution; it may
be viewed as a means of enforcement. Finally,
employees who violate some of the rules know that
their contract may be terminated at once.
232 Avshalom M. Adam and Dalia Rachman-Moore
From the interviews we also learned about the
organization’s culture. Interviewees suggest that ‘‘to
walk the talk’’ represents the inclination of the
organization’s members, and that employees exam-
ine the conduct of their managers to determine
whether or not they walk the talk. The norms that
were part of the work culture at the manufacturing
plant; such as ‘‘assuming responsibility’’ and ‘‘being
accountable’’, set the evaluative principles upon
which the employees are able to obtain an answer to
the question ‘‘what is the right thing to do’’, al-
though, certainly, these are social norms to which
employees may or may not subscribe. Interviewees
also discussed the source of authority for ethical
conduct. Managers’ conduct is always under exam-
ination, with managers’ actions modeling the actions
of subordinates.
The data collected in the interviews served as a
first instrument to grasp the organizational culture
and subculture, namely, the organizational ethical
culture (or the lack thereof), as reflected by inter-
viewees’ understanding of that culture, and through
their choice of language and descriptions of what the
organization means to them. We also used the
interviews as a source for the categories of the re-
search variables.
Discussions with HR representatives
The discussions with the Human Resources rep-
resentatives were quite instructive. We learned that
prior to a candidate’s acceptance as a new em-
ployee, in the initial stages of screening, selection
and recruitment, the organization examines the
congruence between the new recruit’s values and
those of the organization. If congruence is found,
then the recruited employee goes through a set of
routines used in the employee orientation program
as it unfolds in the training period. The socializa-
tion of the recruited employee into the organiza-
tional culture includes training sessions on the
ethical code of conduct and the organization’s other
values, and an introduction to the means of
enforcement, as a part of the organization’s com-
pliance program.
The HR representatives described the style of
management in terms of its objectives and results.
The objectives of the work assigned to employees
ought to be consistent with the organization’s values;
and the results are measured in terms of achievement
of the objectives. The organization divides the work
into tasks that are assigned to teams. In the first
4 months at the manufacturing plant, the employees
undertake training sessions that introduce them into
the organization. In this set of routines, the training
is performed within a structure of sessions and classes
supported by the guidance of older members of the
manufacturing plant. The trainers are always top
executives at the organization, such as the CEO.
The employees are requested to use the organiza-
tion’s set of values as a guide for ethical decision-
making and are told that the set of values is used in
the organization as an evaluative tool to measure
excellence in the workplace. The manufacturing
plant has no dedicated program for implementing
ethics apart from this instruction in its ethical code of
conduct that is aimed at new employees. The pro-
gram is designed to facilitate the initial steps of the
new employees, and their adaptation into the orga-
nizational culture.
The HR representatives did not discuss the
informal methods with us, though they suggested
that the workplace supports a philosophy that
encourages respect for others, and values the
autonomy of the employees, in a variety of ways:
Employees are entrusted and are made to understand
that they are entitled to a set of rights, including the
right to negotiate their role in the organization.
The discussions with HR representatives and the
data collected from the organization’s documents
and through interviews with its employees provided
us with an overview of the organizational mecha-
nisms, the work design, and its philosophy. It thus
facilitated the choices we made in the research
methodology.
Method
The survey was conducted during the year 2000,
among employees of an Israeli subsidiary of a leading
multinational High-Tech corporation headquartered
in the USA. Of the organization’s 1500 employees,
1050 work in the production division. All produc-
tion division employees received questionnaires, of
which 812 were returned, resulting in a response rate
of 77%. All responses were anonymous.
 An Ethical Code of Conduct and Employee Attitudes 233

TABLE I
Distribution of employee tenure (%)

Tenure
0–4a Months 4 Months–1a year 1–2a Years 2–5a Years 5 Years and longer Total
18.3 27.8 37.9 13.6 2.4 100.0 (n = 758b)
a
The upper limit is excluded from each length-of-tenure cohort.
b
Total N = 812. Differences in the number of cases are due to a small number of missing values.

Background characteristics controlling for these background and demographic

Most production division employees surveyed are
relatively new to the organization, with 46.1% of the
employees having tenure not exceeding 1 year. The
length of employment of most division employees
(84%) does not exceed 2 years. The distribution of
tenure is presented in Table I, is: 18.3% of the
employees have been employed less than 4 months;
27.8% of the employees have been employed be-
tween 4 months and less than 1 year; 37.9% of the
employees have been employed between 1 year and
less than 2 years; 13.6% of the employees have been
employed 2 years and less than 5 years; and only
2.4% of the employees have been employed for a
period of 5 years and longer. No other demographic
data were available from the survey questionnaire.
HR representatives gave the following description
of the overall demographic and background char-
acteristics of production division employees: ‘‘Most
production division employees are in the 23–27 age
group, have completed military service and are high
school graduates holding a certificate of matricula-
tion. All new recruits for the production division
undergo a similar selection process in which
employees are not selected unless they are found to
hold values consistent with those of the organization.
The employees share a similar educational level
(high school or post-high school: technicians and
practical engineers): only a small percentage have
post-high school education and some have been
trained at the manufacturing plant.’’
The population in this study is, thus, homoge-
neous with respect to the background and demo-
graphic variables of education level, age, occupation
and recruitment process. Hence, we were able to
examine the different impacts of the various methods
used to implement an ethical code of conduct while
variables.
Procedure
The organization distributes a SOH among its
employees using a self-report questionnaire annually.
The SOH is confidential, reducing the potential for
social desirability bias. To ensure no adverse effect
on the high response rate of previous years, HR
representatives limited the number of additional
questions that could be added to the original SOH.
They also ensured that the added items would be
comprehensible to the production division
employees to whom the expanded version was then
distributed.
Measurement
The variables of the study were derived from the
expanded SOH.
(1) Independent variable: One independent variable
was selected.
The most influential method used in the process
of implementation of organizational ethical values
and rules (labeled ‘‘mimioevr’’).
It was measured through response to the follow-
ing statement:
‘‘The factor that most influences me to behave in
accordance with organizational ethical rules is:
1. Training and courses on the subject of ethics.
2. Social norms of the organization.
3. Means of enforcement.
234 Avshalom M. Adam and Dalia Rachman-Moore
4. Manager sets an example.
5. Other (please complete).’’
The categories of this variable were derived from
the employee interviews and organizational docu-
ments.
(2) Control variable: One control variable was se-
lected: Employee tenure.
Employee tenure was chosen as a control variable
because it may be related to mimioevr and it is related
to employee attitudes (Beck and Wilson, 2000;
Meyer and Allen, 1997, pp. 43–44).
Employee tenure was measured as a reply to the
question:
‘‘How long have you worked in the organization?
1. 0–4* months.
2. 4 months–1* year
3. 1–2* years
4. 2–5* years
5. 5 years and longer.
(*Upper limit excluded.)’’
During the first 3 months of employment the
employees undergo training. It was for this reason
that employees who had been with the organization
for less than 4 months were grouped into a separate
category. Due to the small number (2.4%) of
employees holding tenure of 5 years and longer,
categories 4 and 5 were merged into a single category:
(4): ‘‘2 years and longer’’ for the subsequent analyses1.
(3) Dependent variables: Employee attitudes: Two
dependent variables relating to employee attitudes
were selected:
(i) ‘‘Personal ethical commitment’’ and
(ii) ‘‘Employees’ commitment to organizational
values’’
Both variables were measured using the six-point
Likert scale that measures the extent to which a
respondent agrees with a statement (1 – ‘‘not at all’’;
2 – ‘‘very little’’; 3 – ‘‘little’’; 4 – ‘‘moderate’’; 5 –
‘‘much’’; 6 – ‘‘very much’’).
Personal ethical commitment
‘‘Personal ethical commitment’’ relates to individu-
als’ personal commitment to the organization’s eth-
ical values It is a specific dimension of affective
commitment to that organization. Research con-
cerning the process of implementation of ethical
codes of conduct has focused on comparing the
individual’s values to the organization’s values (Fritz-
Harden et al., 1999; Treviño et al., 1998). However,
our focus was confined to the individual’s commit-
ment to the organization’s ethical values and rules.
This variable was measured as a response to the
statement:
Our organizational ethical values are compatible
with my personal values:
Due to the small number of cases in the first three
categories (1–3) they were merged into one category
representing ‘‘less than moderate’’ (see in Appendix
1 for the distribution of this variable). The remaining
three categories were labeled as follows: (2) ‘‘mod-
erate,’’ (3) ‘‘much,’’ and (4) ‘‘very much.’’
Employees’ commitment to organizational values
In contrast to the first dependent variable’s focus on
the commitment of the individual to the organiza-
tion’s ethical values and rules, this variable focused on
employees’ evaluations degree of commitment, as a
group, to the organization’s general (professional,
ethical, etc) values.
This variable was measured as a response to the
statement:
In our organization, we live by our values: respect
for people, integrity and result-orientation.
Due to the small number of cases in the first three
categories (1–3), they were merged into one
category representing ‘‘less than moderate’’ (see
Appendix 1 for the distribution of this variable). The
remaining three categories were labeled as fol-
lows: (2) ‘‘moderate,’’ (3) ‘‘much,’’ and (4) ‘‘very
much.’’
Statistical analysis
The examination of RQ1 and RQ2 required fre-
quency distribution analyses and the comparison of
percentages across groups. The method used to
examine RQ3 was ordinal regression analysis2 with
 An Ethical Code of Conduct and Employee Attitudes 235

TABLE II option, with 10.1% of all respondents writing ‘‘my

Distribution of the most influential methods used in the own personal values’’ for ‘‘other.’’ Therefore, this
process of implementation organizational ethical values was defined to constitute an additional category of
and rules (mimioevr) the mimioevr variable, the distribution of which is
presented in Table II.
Methods of implementation Percentage
From Table II it is clear that the most frequently
Manager sets an example 10.3 noted method is ‘‘social norms of the organization’’
Social norms of the organization 57.4 (57.4%). Three other methods attained similar fre-
Means of enforcement 1.5 quencies: ‘‘training and courses on the subject of ethics’’
Training and courses on the subject 13.8 (13.8%); ‘‘manager sets an example’’ (10.3%); and ‘‘my
of ethics own personal values’’ (10.1%). A marginal number of
My own personal values 10.1
respondents selected the method, ‘‘means of enforce-
Other methods 1.2
ment’’ (1.5%) and so this category was omitted from
Missing values 5.7
subsequent statistical analyses. An even smaller number
Total 100.0 (N = 812) mentioned various other methods in the category of
‘‘other’’ (1.2%), so they were similarly omitted. Fol-
lowing these redefinitions, four categories of mimioevr
employee attitudes (dependent variables), mimioevr remained: (1) manager sets an example; (2) social norms
(independent variable) and employee tenure (control of the organization; (3) training and courses on the
variable).3 Ordinal regression analysis was carried out subject of ethics; and (4) my own personal values.
because the dependent variables are measured on an RQ2 focused on the relationship between mim-
ordinal scale. ioevr and employee tenure. Table III presents the
distribution of mimioevr by four tenure levels. Pear-
son’s chi-square test results (v2ð9Þ ¼ 28:713,
Results p ¼ 0.001) indicate a significant relationship be-
tween employee tenure and mimioevr.
RQ1 focused on what employees perceived to be As seen in Table III, as employee tenure rises, the
the method that most influenced them to behave in importance given to ‘‘my own personal values’’ in-
accordance with the organization’s ethical values and creases and the importance given to ‘‘training and
rules. It was investigated through the multi-choice courses on the subject of ethics’’ decreases. With
question associated with the independent variable. respect to the ‘‘manager sets an example’’ category,
Some employees chose the open-ended ‘‘other’’ there is only a slight increase for employees at the

TABLE III
Distribution of mimioevr by employee tenure (%)

Mimioevr Tenurea
0–4 months 4 months– 1–2 years 2 years and Total
1 year longer
Manager sets an example 10.4 9.0 10.4 14.7 10.7
Social norms of the 60.0 62.4 66.8 61.2 63.5
organization
Training and courses on 25.6 17.5 11.2 7.8 14.9
the subject of ethics
My own personal values 4.0 11.1 11.6 16.4 10.9
Total 100.0 (n = 125) 100.0 (n = 189) 100.0 (n = 268) 100.0 (n = 116) 100.0 (n = 698)
v2(9) = 28.713, p = 0.001
a
Upper limit excluded.
236 Avshalom M. Adam and Dalia Rachman-Moore

TABLE IV
Ordinal regression models with employee attitudes as dependent variables

Regression coefficients Personal ethical commitment Employees’ commitment to the

organizational values
Threshold coefficientsa
Category 1 )4.02* (0.34) )1.77* (0.28)
Category 2 )2.52* (0.29) )0.18 (0.26)
Category 3 )0.29 (0.29) 2.04* (0.27)
Location coefficientsb Mimioevr
Manager sets an example )0.63** (0.32) 0.60** (0.31)
Social norms of the organization )0.71* (0.25) 0.48** (0.23)
Training and courses )1.00* (0.30) 0.17 (0.29)
My own personal values 0 0
Tenure
0 to <4 months 0.54** (0.25) 1.13* (0.25)
4 Months to <1 year 0.05 (0.23) 0.55** (0.22)
1 Year to <2 years )0.01 (0.21) 0.29 (0.21)
2 Years and longer 0 0
v2(6) 16.73** 29.952*
Pseudo R2 (Nagelkerke statistics) 0.027 0.047
*
p < 0.01, **p < 0.05, ***p < 0.1, the significance of the coefficient is tested by the Wald statistics.
a
Threshold coefficients represent the equivalent of the constant of linear regression. The standard error is presented in
parentheses.
b
Coefficients of location are the partial regression coefficients of mimioevr and tenure. The standard error is presented in
parentheses.

higher level of tenure (2 years and longer). The
method perceived to be of most major influence,
namely, ‘‘social norms of the organization’’ (63.5%),
is shown to remain relatively constant over different
tenure levels.
RQ3 focused on the impact of mimioevr on em-
ployee attitudes, using tenure as a control. Table IV
presents the results of ordinal regression models for
employee attitudes (dependent variables), with re-
spect to mimioevr (independent variable) and tenure
(control variable). No significant interaction was
found between employee tenure and mimioevr in
terms of their impact on employee attitudes. Con-
sequently, ordinal regression was conducted and is
presented without interaction effects.
Personal ethical commitment
The ordinal regression analysis with the two vari-
ables (mimioevr and employee tenure) provided a
significant improvement in prediction4 of personal
ethical commitment than the model based solely on
the marginal probabilities of the personal ethical
categories (v2ð6Þ ¼ 16:763, p ¼ 0.010).
The obtained value of Pearson’s chi-square5 is not
significant (v2ð39Þ ¼ 43:446, p ¼ 0.228) and, there-
fore, the model fits the data. To assess the overall
goodness of fit of the model, Pseudo R2 ¼ 0.027
(Nagelkerke statistics6) was calculated. The low va-
lue obtained for Pseudo R2 indicates that the size
effect of these two variables (mimioevr and employee
tenure) is not large.
The test for parallel lines7 was performed and the
resulting Pearson’s chi-square value was not signifi-
cant (v2ð12Þ ¼ 7:182, p = 0.845); hence, we can as-
sume that a single set of partial regression coefficients
exists across all the response categories of personal
ethical commitment, although the thresholds (con-
stants) differ.
The partial regression coefficients8 that predict
‘‘personal ethical commitment’’ by mimioevr and
employee tenure are also presented in Table IV.
These results indicate negative and significant partial
 An Ethical Code of Conduct and Employee Attitudes
coefficients for all mimioevr categories when com-
pared with the category, ‘‘my own personal values,’’
which had a coefficient of 0. Employees who noted
‘‘training and courses on the subject of ethics’’ had
the lowest coefficient ()1), with the coefficients for
‘‘manager sets an example’’ and ‘‘social norms’’
falling in the middle ()0.63 and )0.71, respectively).
These results indicate that the group of employees
that refer to ‘‘my own personal values’’ is likely to
hold the highest personal ethical commitment while
the employee group that refers to ‘‘training and
courses on the subject of ethics’’ is likely to hold the
lowest, with the groups of employees that refer to
‘‘manager sets an example’’ and ‘‘the social norms of
the organization’’ being situated between them. The
partial regression coefficient of the group of
employees that hold tenure of zero to less than
4 months is positive and significant (0.54) when
compared to the group of employees that hold
tenure of 2 years and longer (0). Thus, the former
group of employees is more likely to hold a high
level of ‘‘personal ethical commitment’’ than is the
latter.
Employees’ commitment to the organization’s values
The ordinal regression analysis of mimioevr and ten-
ure yielded a significant improvement in the pre-
diction of employees’ commitment to the
organization’s values compared to the model based
solely on the marginal probabilities of the categories
of that variable (v2ð6Þ ¼ 29:952, p ¼ 0.000). The
Pearson’s chi-square that we obtained was not sig-
nificant (v2ð39Þ ¼ 42:686, p ¼ 0.316), indicating that
the model fits the data. The low value of Pseudo
R2 ¼ 0.047 that we obtained indicates that the size
effect of these two variables is not large. The test for
parallel lines resulted in a non-significant value of the
Pearson’s chi-square (v2ð12Þ ¼ 19:474, p ¼ 0.078);
hence, we can assume that a single set of partial
regression coefficients (i.e. location coefficients, see
Table IV) exists across all the response categories of
‘‘employees’ commitment to organizational values,’’
although the thresholds (constants) differ.
With respect to mimioevr, the results indicate
positive and significant partial coefficients for the
categories, ‘‘social norms of the organization’’ and
‘‘manager sets an example,’’ compared to the cate-
gory ‘‘my own personal values.’’ The coefficients of
the employee groups ‘‘manager sets an example’’ and
237
‘‘social norms of the organization’’ show that they
have the highest coefficients (0.60 and 0.48,
respectively), whereas ‘‘training and courses on the
subject of ethics’’ and ‘‘my own personal values’’
have the lowest coefficients (0.17 and 0, respec-
tively) and the lowest likely commitment in terms of
this variable. The results indicate that employees
who note the most influential informal method to be
the ‘‘manager sets an example’’ or ‘‘social norms of
the organization’’ are likely to consider employees,
as a group, to be more committed to the organiza-
tion’s values than are those who refer to’’ my own
personal values.’’
Partial regression coefficients for employees who
hold tenure of 0 to less than 4 months, and 4 months
to less than 1 year, are both positive and significant
(1.13 and 0.55, respectively) when compared with
employees who hold tenure of 2 years and longer
(0). Consequently, the former are likely to rate
‘‘employees’ commitment to the organization’s val-
ues’’ higher than the latter.
Discussion
Research questions and their answers
Few studies have examined empirically the effec-
tiveness of methods used in the process of imple-
menting an ethical code of conduct. We attempted
to explore this issue through three research ques-
tions. In posing RQ1 and RQ2, we aimed at
exploring (a) which of the diverse methods used in
the process of implementing organizational ethical
values and rules is perceived by employees as having
most influence on their ethical conduct, and (b)
whether the employees’ perceptions changed over
their tenure.
We found that a majority (67.7%) of employees
noted the informal methods as being most influen-
tial, which indicates that they perceive the social
dimension of the work environment to be the
greatest source of influence on their ethical conduct.
More than half of the respondents (57.4%) specified
the informal method ‘‘social norms of the organi-
zation,’’ and a smaller number (10.3%) specified the
‘‘example set by the manager.’’ These results were
relatively stable over time. Employees may have
identified the ‘‘social norms of the organization’’ as
238 Avshalom M. Adam and Dalia Rachman-Moore
having most influence on their behavior as a result of
the teamwork style used in the organization. The
teamwork style discourages deviation and encour-
ages co-operation within the organization and its
teams. Thus, it coerces individuals to align them-
selves with the team’s norms. In this style of work,
the compliance of the organization’s members with
its ethics is also measured. Further study is required
to explore this possible explanation.
Indeed, the teamwork style is part of the work
design approach; it is reflected in the organization’s
actions, training and courses and in the development
of its culture. The process of implementation is
embedded in different work routines and so ethics
become an integral part of the various facets of the
work. The manger as a role model also plays an
important role in the implementation process. The
style of management is by objectives, against which
the results are measured for self-correction and
evaluation purposes. This is indicated by the fact that
ethics is also used as a management tool, for example,
reward and punishment systems are connected to the
desired conduct. Thus, the style of management
enhances the role played by ethical values and rules,
regulates the conduct of the organization’s members,
and highlights the constraints imposed on the
(seemingly) free moral choice of the members.
In contrast to the above pattern, a relatively small
percentage of the respondents (15.3%) specified for-
mal methods: most respondents (13.8%) indicated
‘‘training and courses on the subject of ethics,’’ while a
marginal number (1.5%) indicated ‘‘means of
enforcement.’’ The latter result may be surprising, as
the common view is that organizational enforcement
mechanisms are of prime importance as control
mechanisms and are considered to effectively impact
on the conduct of employees. The approach of policy
makers, as exemplified by the FSG, rests on a (mis-
taken) assumption that is rarely tested empirically.
The FSG presents to business organizations a potential
monetary incentive to implement its program, in that
failing to do so would result in a severe penalty. The
FSG lays emphasis on formal methods such as means
of enforcement, auditing, and monitoring systems to
oversee and enforce discipline. The assumption made
by policy makers is that formal methods are of crucial
importance in effecting ethical practice. This
assumption, however, stands at odds with the results
of a recent study (McKendall et al., 2002), which
shows that formal methods as prescribed by the FSG
do not deliver the desired outcomes. Nor do the re-
sults of this study support this assumption. More re-
cently, Enron, for example, though employed formal
methods in the process of implementing an ethical
code of conduct (Paine, 2003), committed unethical
practices that contributed to great losses for a variety of
stakeholders, and consequently, contributed to
uncertainty and mistrust in national and global trade.
Similarly, in the organization that we studied, the
formal training and courses that new employees un-
dergo represent a considerable part of their assimila-
tion period into the organization. The first learning
phase familiarizes the employee with documents
setting out what the organization perceives to be
proper conduct, and how a variety of work proce-
dures are executed: a special session on the code of
conduct is delivered by a senior manager, sometimes
by the CEO. This is conducted in a well-organized
manner, underlining the seriousness the organization
places on its values and on the well being of its
employees. As this period prefaces orientation with
respect to the technical production processes, the
importance the organization places on the social facet
of the workplace is emphasized. Therefore, the pro-
cess of implementation of the ethical code of conduct
is not only an important part of socialization but also
contributes to social order in the organization. This
process has a direct impact on the characteristics of the
workplace, characteristics that are translated into
work procedures. Viz., the value ‘‘respect for people’’
underpins desired conduct: it is an intrinsic value (i.e.,
it is valued as the right thing to do regardless of the
consequences); and it has an instrumental value (i.e.,
it is adhered to in professional meetings as well as in
nonprofessional meetings). This embedding of orga-
nizational values into work procedures may also ex-
plain the importance that the employees attribute to
the ‘‘social norms of the organization,’’ in that,
through this embedding process, the organization’s
stated values and rules become the social norms of the
organization. The emergence of social norms as an
influential method in itself suggests that an imple-
mentation process predicated solely upon adoption of
formal methods will be inadequate.
In the interviews, employees placed a greater
emphasis on the contribution of formal methods to
their ethical conduct than emerged from the SOH
data. In particular, they spoke of the importance of
 An Ethical Code of Conduct and Employee Attitudes
training, courses and enforcement. The use of
‘‘training and courses on the subject of ethics’’ im-
proves understanding of an organization’s philoso-
phy. Moreover, since the session on the ethical code
of conduct is delivered by one of the high-ranking
executives, in the early stages of the employee’s
orientation in the organization, it may leave an
unforgettable impression about the importance as-
signed to ethics in the work place. Interviewees also
referred to enforcement, notably, termination of
employment upon an incident of surfing into a
pornographic website, in terms similar to those used
when they discussed training. Yet only a marginal
number of employees noted means of enforcement
as being the most influential method in the expanded
SOH survey. This suggests that, though ‘‘means of
enforcement’’ may be a controlling factor, they are
not the most influential factor.
Thus, we found that all the diverse methods that
are used to implement the ethical code of conduct
play a role in one or more of the organizational
processes, from selection of new employees, to
managing the workforce, and socialization (to name
but a few important ones); processes which con-
tribute to the organization’s management and its
culture. Clearly, the diverse methods used in this
implementation process contribute to the transmis-
sion of values and norms.
With respect to RQ2, the number of respon-
dents indicating the importance of the ‘‘social
norms of the organization’’ remained relatively
stable across different lengths of tenure, while the
importance of training and courses decreased as
employee tenure increased. This may reflect the
internalization of the ethical code of conduct by
employees (as a result of ongoing exposure to it, as
it guides decision making in the organization (Clark
and Leonard, 1998; Cowton and Thomson, 2000))
while the process of training and courses through
which it was originally learned was gradually for-
gotten. It is also possible that this employee group
identifies with the ethical code of conduct. That is,
the well-organized process of implementation,
through which the organizational values are
embedded into the different work-place routines,
leads to employees identifying with the organiza-
tion’s values to such an extent that they ultimately
assimilate them, adopt them and recognize those
values as their own (Pavitt, 2001).
239
Still another employee group needs to be consid-
ered in terms of RQ1 and RQ2, namely, those
respondents (10.1%) that perceived the factor ‘‘my
own personal values’’ to be the major source of
influence on their ethical conduct. Unlike other
employee groups mentioned above, that selected
formal or informal methods that are controlled by the
organization, this employee group turned inward.
Furthermore, as tenure increased, the influence of
this factor increased. This result provides an initial
characterization of the group of employees that identify
their own personal values as their source of moral
authority. Members in this group perceive their own
personal values as a guide, that is, their values are a
personal self-regulating mechanism. This outcome
may reflect a personal realization of a gap between
what is preached by the organization and what is
practiced by its employees. Recognition of the gap
can bring about not only a sense of disillusionment,
but also disappointment in the organization’s ethical
capacity. Over time, this experience may impede the
moral authority of the organization, as the individual
turns inward, into her/his own moral values for
moral guidance. There is another viable possibility
that is not inconsistent with the previous one. It is
that, subsequent to the initial stages of the process of
socialization in the organization (i.e., the stages
during which formal methods were used to imple-
ment the ethical code of conduct), tenured
employees came to recognize the organization’s
values as their own; and their motivation for com-
plying with the organization’s values shifted from
external authority to internal authority. Still another
explanation may suggest itself to explain the growth
of this group over time. It may be that the organi-
zation’s values, as initially perceived by new
employees, were not dissimilar to their own values
and, as time went by, in the course of the socializa-
tion process, these employees came to recognize the
similarity between their own and the organization’s
values and, gradually, this recognition increased their
sense of identification with the moral view of the
workplace. Further research is needed to examine
this set of possible explanations. We will return again
to discuss this group of employees below.
In answering RQ3, we analyzed the impact of the
diverse methods used in the process of implementing
an ethical code of conduct on employee attitudes. In
this context we studied two employee attitudes: the
240 Avshalom M. Adam and Dalia Rachman-Moore
personal commitment of employees to the organi-
zation’s ethical values and the perceived commitment
of employees, as a group, to all the organization’s
values. We view the results as being indicative of the
effectiveness of the implementation process.
We observed that the employee group that noted
the factor ‘‘my own personal values,’’ was signifi-
cantly different to all other respondent groups with
regard to employee attitudes. For all other groups,
there was some consistency between the way they
ranked their own compliance with the organiza-
tion’s ethical values, and how they viewed the
compliance of employees, as a group, with all its
values. By contrast this group, while emerging as
having the most commitment to the organization’s
ethical values (i.e., highest ‘‘personal ethical com-
mitment’’), was likely to consider employees, as a
group, to have the least commitment to all the
organization’s values (i.e., lowest ‘‘employees’
commitment to the organizational values’’). This
may be because of a pre-existing correspondence
between what the members of this group named
‘‘my own ethical values’’ and the organizational
values. If so, this relationship constitutes a relatively
high degree of identification with the organizational
values. Conversely, however, perhaps it is because
this employee group is extremely sensitive to any
deviation from the organization’s stated values, so it
questions the sincerity of other employees’ com-
mitment to those values, and attributes to them a
correspondingly low degree of commitment. (A
suggestion for further research is discussed in
‘‘Implications’’ section below)
In the analysis of the results we found that
employees who noted informal methods differ from
those who noted the formal method with respect to
employee attitudes. Specifically, those who indicated
the informal methods, namely, the ‘‘manager sets an
example’’ or ‘‘social norms of the organization’’,
were likely to be more personally committed to the
organizational ethical values (this being a dimension
of affective commitment), and to consider employ-
ees, as a group, to be more committed to all the
organizational values, than were those who noted the
formal method ‘‘training and courses on the subject
of ethics.’’ These results are consistent with those of
Treviño et al. (1998) and Fritz-Harden et al. (1999).
Treviño et al. (1998) found that training and courses
(formal methods) had less effect on employees’
affective commitment than did the ethical environ-
ment. In both studies, manager as a role model seems
to have a relatively strong impact on affective com-
mitment in comparison to other methods used in the
process of implementing an ethical code of conduct.
Therefore, we suggest that an effective process of
implementation for an ethical code of conduct
should include informal methods in addition to for-
mal methods. This corroborates Murphy’s approach
(1988), which stresses the crucial role for informal
methods side by side with formal methods in the
process of implementing an ethical code of conduct.
Implications
It is quite surprising that the majority of employees
suggest that informal methods are highly influential
on their conduct, in that many businesses spend
enormous funds on means of enforcement and on
other formal methods. Our results indicate that
formal methods used in the process of implementing
an ethical code of conduct are important, but not
sufficient. This realization is quite important,
particularly for employers that encourage social
interactions, in addition to ‘‘strictly’’ business-re-
sults-oriented interactions, among members of the
organization. Furthermore, if team style is viable, the
organization ought to contribute more space and
time towards the growth process of teamwork, such
as team-building activities in social settings.
The informal method of the ‘‘example set by the
manager’’ seems to play a major role in influencing
employees’ conduct. This group was small in num-
ber, but had a relatively high level of affective
commitment. This signifies that this group inter-
nalized the organization’s values. What it implies for
the employer is that the organization ought to
encourage its managers to set an example, if indeed
the organization desires the employees to assimilate
its values. This research supports the conclusion that
ethical values, as manifested in the activity of man-
agement, are perceived to have a major impact on
the ethical choices of employees (McDonald, 1999;
Schwepker, 1999; Wulfson, 1998). Training man-
agers in ‘‘management ethics’’ may contribute to
their skills and perhaps to their performance as a role
model in this aspect (Treviño and Nelson, 1999). By
equipping managers with the skills required for
 An Ethical Code of Conduct and Employee Attitudes
ethical decision making, the organization not only
directs the awareness of its management towards
ethical concerns, it also enables a change in the
possible outcome of their actions; indeed it appears
that this is a sufficient condition for better outcomes,
including better business outcomes (Paine, 2003).
The employee group that noted the factor ‘‘my
own personal values’’ as having the most influence
on their ethical conduct may be used by the orga-
nization to reorient its strategy. Their views and the
answers they give to questions could form part of an
early warning system that may be used by the
organization to maintain a consistent relationship
between its values and the conduct of its members
(Laufer and Robertson, 1997).
The relationship between the various methods
used in the process of implementation and employee
attitudes needs to be further explored to refute or
corroborate the results of this study. It could be the
case that a mix of methods would best contribute
towards an effective implementation process. It
seems that methods such as ‘‘the social norms of the
organization’’ and ‘‘the example set by the manger’’
should be important components of any program for
an effective implementation process and the estab-
lishment of an ethical code of conduct (White and
Lam, 2000). The results of this research counter the
assumption inherent in the FSG, which relies on
the use of mostly formal methods as a vehicle for the
process of implementing an ethical program. Indi-
rectly, the findings of the present research point to
the importance of the organization’s self-regulation
mechanisms, including allowance for members’ self
regulation: a culture that encourages a degree of
personal autonomy amongst its members.
Limitations of the study
This study focused on a single organization, using a
sample that, although large, was relatively homoge-
neous. Most employees had a similar background in
terms of tenure, training and function within the
organization. Despite the control of variables en-
abled by this homogeneity, small size effects (due to
restrictions of range) were found in some cases (see
Pseudo R2 values in partial ordinal regression coef-
ficient tables). Nevertheless, the findings indicate
certain consistent patterns, which allow a compre-
241
hensive explanation to be proposed. In addition, the
measures used for employee attitudes were based on
one or two items at most. The independent variables
and the dependent variables were based on a com-
mon method; both were derived from the same
employees’ SOH. To enable the findings of this
study to be generalized, further studies should be
conducted on populations from different industries,
demographic backgrounds and at different levels of
organizational hierarchy. Further studies should be
undertaken using means that enable each of the
dependent variables to be measured separately, on
the basis of the conduct of organizational members,
side by side with employee attitudes.
Conclusions
The unethical practices of some business organiza-
tions have damaged severely the trust that is required
for national and global trade. Its direct and indirect
negative impact on the wealth of society and its
contribution to the sense of mistrust felt by indi-
viduals in the market have rebounded to weaken the
business sector, and in some cases even to jeopardize
the existence of some, once important, business
organizations (Paine, 2003). Policy makers
attempting to address the root of the problem offer
formal controls as self-regulation mechanisms in
order to restore trust and decrease unethical practices
by business organizations.
The first aim of this study was to explore the issue
of whether formal controls are perceived by orga-
nizational members to be sufficient for the purpose
of implementing an ethical conduct in a business
organization. We were interested in investigating
how a business organization can best implement an
ethical code of conduct. We found that the use of
formal controls in the process of implementing an
ethical code of conduct is perceived differently by
different members of the organization. In addition to
formal controls, there are other necessary factors,
such as informal controls, that are perceived by
organizational members as having most influence on
their conduct.
The second aim of this study was to examine the
relationships between the perceived most influential
methods and employee attitudes. In this respect, the
results of this study indicate that the informal
242 Avshalom M. Adam and Dalia Rachman-Moore

methods (‘‘manager sets an example’’ or ‘‘social invited me to conduct my research as a Visiting

norms of the organization’’) are likely to yield a Scholar; still last but not least, in her kind help, Ms
greater commitment with respect to both employee Lorraine Seiji made my one year research at Haas
attitudes than the formal method (‘‘training and School a pleasant experience.
courses on the subject of ethics’’). Thus, the orga- This research was financially supported by the
nization perhaps needs to pursue means for Research Unit of The College of Management,
enhancing ethical leadership qualities at the man- Academic Studies, School of Business Administra-
agement level (Treviño and Nelson, 1999). The tion, Rishon Le’Zion, Israel.
personal control method (‘‘my own personal
values’’) differs significantly from all the other Appendix 1
methods in that it yields the highest degree of Distributions of employee attitudes (%)
‘‘personal ethical commitment’’ and the lowest de-
(1) (2) (3) (4)
gree of ‘‘employees’ commitment to organizational Less than Moderate Much Very Total
values.’’ Thus, organizations should consider pro- moderate much
viding a venue for the questions and views of this
group, since these may serve as a vehicle through Personal ethical
which the organization can engage in self-correction commitment
and self-scrutiny (Compare, Paine, 2003). 3.9 10.1 44.7 41.4 100.0
(n = 805a)
Employees’
Acknowledgements commitment to
the organization’s
We are grateful for the assistance of the staff of the values
Central Library in the College of Management, 7.2 20.8 49.6 22.5 100.0
(n = 797a)
Rishon-Lezion, Israel, notably: Ms Beatrice So-
lenchyk, Ms Anna Lando, and Ms Jenna Reznik. a
Total N = 812. Differences in the number of cases are
Earlier parts of the paper were presented in the 8th due to a small number of missing values.
Annual Conference of the Australian Association for
Professional and Applied Ethics, Adelaide, Australia, Notes
September 2001; and in the Annual Conference of 1
This merging is based on the structure of the
the Israeli Statistical Association, Neve Ilan, Israel,
standardized residuals and the Pearson’s chi-square tests,
May 2002. We thank anonymous critics in both which confirm that loss of information is not significant.
conferences for their constructive criticisms. Based on this procedure, all the following variables
We acknowledge our debts to Ms Varda Silber- presented in the tables are merged.
berg who assisted us at early stages of the research, in 2
Ordinal regression analysis is based on a generalized
discussing some of its issues and conducting several linear model predicting the cumulative probabilities for
parts of its qualitative phase. We greatly appreciate the categories. With this method, a separate equation is
the contribution of Dr Tzachi Ashkenzy to the data derived for each category of the ordinal dependent
analysis. We thank Professor Arie Reichel of Ben variable. Each equation represents a predicted probability
Gurion University and Dr Robert Zaug of Bern of membership in the respective category or any lower
University for their comments on a previous version category. The prediction of the last category is always 1.0
(since all cases must be in either the last category or a
of this paper. The paper in its final stages was co-
lower category); therefore, the prediction of equation for
written in email correspondence between Berkeley
the last category is superfluous. Rather than predicting the
and Rishon-Lezion. Thus I (A.M. Adam) also wish actual cumulative probabilities, the model predicts a
to thank Professor Yoram Eden, the Dean of the function of those values. The Logit link function was
School of Business Administration at the College of selected, since it best fitted the data.
Management, for granting me one year of leave in 3
We used PLUM, a procedure proposed in the SPSS
2003/4; and to the generous hospitality of Professor statistical package (SPSS, Advanced Model 10.0, 1999,
David Vogel of the Haas School of Business who pp. 241–260).
 An Ethical Code of Conduct and Employee Attitudes
4
Pearson’s chi-square goodness of fit statistic was
calculated (computed as the difference between 2 times
the log-likelihood of the intercept – only of the ordinal
regression model and the final ordinal regression model)
indicating the degree by which the ordinal regression
model provides a significant improvement in prediction
over the model based solely on the marginal probabilities
of the categories of employee attitudes.
5
Pearson’s chi-square was calculated to test the model’s
goodness of fit. This test indicates whether the observed
data are consistent with the fitted ordinal regression
model. The null hypothesis is that there is no difference
i.e., the ordinal regression model fits the data.
6
Pseudo R2 (Nagelkerke, 1991) was calculated. This
measure was developed to serve the same function as the
coefficient of determination in linear regression models
(namely, to summarize the proportion of variance in the
dependent variable associated with the variables: mimioevr
and employee tenure). It is based on likelihood ratios
rather than on raw residuals.
7 Organizational Context’, Journal of Business Ethics 16,
A simpler ordinal regression model may be used by
assuming that the same parameters appear in the partial
regression coefficients of the independent and control
variables, (named: ‘‘location parameters’’) for all catego-
ries of the dependent variable. Therefore, a test for
parallel lines was performed, with the null hypothesis that
the location parameters (partial regression coefficients of
mimioevr and tenure) are the same across response
categories of employee attitudes. We found that the
assumption of parallel lines cannot be rejected for each of
the dependent variables. The constants (named: ‘‘thresh-
old parameters’’) in the model may be different even
though the location parameters are the same.
8
With respect to estimating the partial regression
coefficients of mimioevr and employee tenure for each of
the employee attitudes: the ordinal regression model
under examination is comprised of two categorical
variables (mimioevr and employee tenure), each consisting
of four categories. Of the four categories, three regression
coefficients were obtained when the fourth category was
set to zero (due to redundancy, similar to dummy
variables in linear regression). The interpretation of the
partial regression coefficient of the independent variables
(location coefficient) is not straightforward. Nevertheless,
the sign of the coefficient can indicate whether a positive
or a negative relationship exists between the independent
and the dependent variable.
A positive coefficient of a certain category of the
independent variable indicates that when all other
variables in the equation are held constant, membership
to this category will predict a higher value of the
dependent variable than will membership in the last
category of the independent variable (which is zero). A
243
negative coefficient of a certain category of the indepen-
dent variable indicates that when all other variables in the
equation are held constant, membership to this category
will predict a lower value of the dependent variable than
will membership in the last category of the independent
variable.
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Avshalom M. Adam
Haas School of Business,
Faculty Wing, Room F463,
UC Berkeley, CA 94720-1900,
U.S.A.
E-mail: avshalom@openu.ac.il
Dalia Rachman-Moore
The School of Business Administration,
The College of Management,
7 Yitzhak Rabin Blvd,
POB 25074, Rishon Lezion
75190, Israel
E-mail: drmor@colman.ac.il