J Bus Ethics (2013) 116:233–250
DOI 10.1007/s10551-012-1459-3
The Dissolution of Ethical Decision-Making in Organizations:
A Comprehensive Review and Model
Ralph W. Jackson • Charles M. Wood •
James J. Zboja
Received: 16 March 2012 / Accepted: 16 August 2012 / Published online: 1 September 2012
 Springer Science+Business Media B.V. 2012
Abstract The purpose of this research is to present the
major factors that lead to ethical dissolution in an organi-
zation. Specifically, drawing from a wide spectrum of
sources, this study explores the impact of organizational,
individual, and contextual factors that converge to con-
tribute to ethical dissolution. Acknowledging that ethical
decisions are, in the final analysis, made by individuals,
this study presents a model of ethical dissolution that gives
insight into how a variety of elements coalesce to draw
individuals into decisions that result in the ethical undoing
of an otherwise healthy organization. ENRON, TYCO and
WorldCom did not happen in a vacuum. Nor can such
debacles be explained as simply one or two individuals
who were morally corrupt. The ethical breakdowns that
occurred in these companies happened over a period of
time, involved numerous individuals both inside and out-
side of the organization, and brought about the implosion
of viable companies. Seeking to extend the work of pre-
vious researchers, this study attempts to tie together a
disparate set of factors into a cohesive explanation of
ethical breakdowns in organizations.
Keywords Corporate ethics
Ethical breakdown
Ethical
decision-making
Ethical development
Ethical
dissolution
Organizational networks
Organizational
leadership
R. W. Jackson (&)
C. M. Wood
J. J. Zboja
Collins College of Business, University of Tulsa,
800 South Tucker Drive, Tulsa, OK 74104, USA
e-mail: ralph-jackson@utulsa.edu
Introduction
The examples of unethical and sometimes illegal corporate
behavior are by now both ubiquitous and legendary. While
in more recent times, examples such as ENRON, Tyco,
WorldCom, DynCorp, and Bernie Madoff have made
headlines and drawn attention to the subject, unethical
behavior is not strictly a contemporary phenomenon. In the
1980s, we were graphically shown the result of poor ethical
decision-making of upper management at Morton-Thiakol
and NASA as the space shuttle exploded on our televisions.
That disaster occurred in spite of efforts by a recently
deceased engineer who tried to stop the launch. That decade
also was witness to the Union Carbide disaster in Bhopal,
India. In the 1970s, we saw the decision-making behind the
Ford Pinto that resulted in deaths and injuries that could have
been avoided with a relatively minor investment. Suffice it
to say that unethical decisions have been part and parcel of
corporate life since corporations were first formed.
At the outset of any discussion of ethics, it is tempting to
take the position that ethics, in the final analysis, are the
purview of individuals. The argument is that it is not cor-
porations that are unethical but individuals, thus the dis-
cussion of ethics must focus on the individual rather than
the organization. We accede to the conclusion that ethical/
unethical decisions are made by individuals, but we would
point out that individuals do not operate in a vacuum. The
organizational culture and the context serve to shape or at
least influence the ethical decision-making process of the
individual. In addition, we are examining what brings
about bad ethical decision-making in individuals or groups
within organizations that had heretofore operated within
legal and ethical limits. Further, we suggest that the
breakdown in ethics is a process that takes place over time
and that occurs when certain elements are aligned.
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The purpose of this article is to examine the factors and
elements involved in the ethical meltdowns that seem so
common today. While one might reasonably ask whether
we need yet another article dealing with the ethical
implosions that dot the business landscape, there remains a
need to further examine the issue in hopes of developing a
theoretical grounding in ethical deterioration. Yadav
(2010) found a decline in the number of conceptual articles
published and argues that such articles play an important
role in scholarship. We would agree. While empiricism is
critical, it is equally necessary to, at times, step back and
coalesce the research into its logical connections. Absent
that, we simply have buckets of information that do not
relate well together and give only partial glimpses at
problems. So, we hope to not only review some of the
major work to date, but also to present a comprehensive
model of ethical dissolution that includes additional factors
that we think have an impact on ethical decision-making in
organizations. In addition, we present some propositions
that can guide future empirical study.
Factors in Ethical Dissolution
There are three major sets of factors that are related to the
dissolution of ethics in an organization. They are: Indi-
vidual Factors, Organizational Factors, and Contextual
Factors. By Individual Factors we mean those facets of the
Fig. 1 Basic model of ethical
dissolution
Individual Factors
yes
Decision to Take an
Unethical Action
(feedback)
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R. W. Jackson et al.
person’s background that come together to form his or her
world view, value system and approach to living. Included
within Organizational Factors are the elements that impact
the operating environment of the organization. Contextual
Factors are the features of the situation that can exert
influence on the decision.
Our assumptions in this article are: ethical dissolution
takes place over time; the dissolution process involves a
group or groups of people within the organization; the
breach in ethics causes measurable harm to persons inside
and outside the organization; and that the harm caused is
sufficient enough to damage the reputation of the organi-
zation. We will consider the dissolution of ethical behavior
as occurring as the result of a set of decisions and actions
by individuals who are part of a group, and the group has
acted within the organization in a given context or set of
circumstances (Fig. 1).
Each of the following sections draws inspiration from
myriad theories in the literature. Taken in its entirety,
however, the model put forth by this research is inspired
through the integration of the Theory of Reasoned Action
(TRA) (Fishbein and Azjen 1975), and Milgram’s Agentic
Shift (1974). While not visually identical, our model adopts
many of the structural elements of the Theory of Reasoned
Action. First, our major categories of individual and
organizational factors serve relatively well as proxies for
the attitude and subjective norms elements of the TRA.
Unlike the TRA, however, we have also included
Organizational
Factors
Recognition of the Ethical
Overtones of a Decision
no
Contextual Decision to Take an
Factors “Unethical” Action
Engaging in
(feedback)
Unethical
Activity
A Comprehensive Review and Model
contextual factors as a third major element in our model of
ethical dissolution. Second, following the TRA assumption
that humans are rational and can make systematic use of
available information, we have included the mediating
factors of ‘‘recognition of the ethical overtones of a deci-
sion’’ and ‘‘decision to take an unethical action’’ as proxies
for the intention step that precedes behavior in the TRA.
Finally, part of the TRA’s attitude component was an
individual’s evaluation of the outcome. We have accounted
for this factor with a feedback loop that recognizes that our
subsequent attitudes are affected by the consequences of
our actions. Ajzen (1991) added the variable perceived
behavioral control to his expanded version of the TRA
named the Theory of Planned Behavior. This factor
accounts for a lack of confidence or control that can keep
intentions from being realized as behavior. This element
serves as an appropriate segue to Milgram’s (1974) concept
of ‘‘agentic shift.’’ The underlying assumption of our
model is that the individual or group is making decisions
within the context of an organization. Specifically, when
operating within an organization, an individual can see
him/herself as somewhat of a pawn following orders.
Milgram (1974, p. 129) expressed it thusly, ‘‘when he (sic)
functions in an organizational mode, directions that come
from the higher level component are not assessed against
the internal standards of moral judgment.’’ While, we
contend that the individual still has a more heavily-
weighted impact in the decision-making process (as evi-
denced by our extensive treatment of the individual factor
in our model), this ‘‘erosion of agency’’ as Milgram termed
it, ultimately can result in an erosion of personal respon-
sibility (Card 2005).
Individual Factors
Certainly, ethical decision-making and the deterioration of
ethics within an organization is, in the final analysis, based
on the decisions and actions of individuals. Having said
that, Iyer (2006) suggests that while individuals make
decisions, corporations possess what he calls the ‘‘internal
corporate decision-making structure’’ (CID) which repre-
sents an established approach to making decisions within
the organization and which impacts individuals’ approach
to decision-making within that corporation. Rest et al.
(1986), on the other hand, posit that the ethical decision-
making process rests in the individual. They suggest that a
person who is ‘‘behaving morally’’ has performed at least
four psychological processes: (1) The person must know
the possible courses of action, whom are the affected
parties and the impact on each; (2) The person must be able
to determine which course is morally correct; (3) The
person must give priority to moral values over personal
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interests; and (4) The person must have the strength and
skill to follow through. We propose that the process of
dissolution gains momentum when one or more of the
above processes breaks down. The confluence of a number
of individual factors provides the platform on which these
processes function. We will now consider several individ-
ual factors and their impact on the dissolution of ethical
decision-making.
Level of Moral Development
That the level of ethical or moral development plays an
important role in ethical decision-making has been well-
established by a number of researchers (e.g., Ferrell and
Gresham 1985; Trevino 1986; Bommer et al. 1987; Ferrell
et al. 1989; Jones and Ryan 1997). Important among the
earlier work on cognitive development was the work of
Piaget. Beginning in 1929, he published a series of books
and articles outlining the process of cognitive and of moral
development (1929, 1947, 1948, 1952, 1960). Piaget pro-
posed that people progress through four stages of ethical
development as they age. Each of these stages represents
not only the development of cognitive skills but also the
development of moral reasoning.
Perhaps the most popular model of cognitive moral
development (CMD) was proffered by Lawrence Kohlberg.
Kohlberg (1984) proposed that individuals go through six
stages of moral development, the progression of which has
been found to be positively correlated with age and edu-
cational level (Rest and Deemer 1986). These six stages
show a progression of the person’s moral development
from what he calls the ‘‘Premoral’’ level in which the
person’s decision-making is driven almost exclusively by
external rules and focuses on avoiding punishment. In the
third and fourth stages, which Kohlberg refers to as
‘‘Morality of Conventional Role Conformity,’’ the person
refers to standards outside the immediate family and turns
to a wider frame of reference. At this level, the person is
still using an external frame of reference but is doing so on
a more cognitively complex level. The final two stages in
what Kohlberg refers to as the ‘‘Morality of Self-Accepted
Moral Principles’’ represent the transition from an external
to an internal frame of reference. The person who reaches
stage six has developed to the point that his or her moral
compass is internal, and he or she generally makes ethical
determinations based on a well-developed, internal ethical
framework.
Though there are criticisms of his model (see Kohlberg
et al. 1983), in general there is widespread support for a stage
theory of Kohlberg’s conception of Cognitive Moral
Development (CMD). Applying Kohlberg’s model, there is
a good case to be made that if a person’s CMD is truncated at
the fourth level, Authority-Maintaining Morality, that
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person does not possess a well-defined internal moral
compass and must rely on information external to him or
herself to determine the morality or ethicality of a decision/
action. Such a person sublimates his or her moral choice to
another, and depends on the ethical grounding of the other.
The presence of many such individuals, coupled with one or
a few bad seeds, could certainly erode the ethical environ-
ment. On the other hand, the person who has developed to
stage six, Morality of Individual Principles of Conscience,
will make moral/ethical decisions predicated on a well-
developed, internalized standard. That does not mean that
such an individual will not receive input from others in
making an ethical decision, but that the person will evaluate
such input through his or her own ethical filters. In addition,
it is not being proposed that a person at stage six of devel-
opment will always make the ‘‘right’’ ethical choice. That
person might employ an internalized standard not in line
with that of society, or he or she might misapply a societal
standard in arriving at a decision. The contextual aspect of
the moral reasoning of managers in a business setting was
explored by Trevino (1986). She proposed, based on cultural
anthropology, that managers tend to use a lower level of
moral reasoning for business decisions than they do for the
other domains of life (e.g., family). This divergence in
contextual moral reasoning coincides with Wolin’s (1960)
interpretation of Machiavelli’s two levels of morality: public
and private; when the two clash, Machiavelli would suggest
the most practical solution. This contextual aspect adds
complexity to the following proposition, however, the gen-
eral argument stands.
Proposition 1 Organizations with a leadership com-
prised of multiple individuals who have truncated cognitive
moral development are at greater risk of ethical
dissolution.
Formal Education in Ethics
A number of studies have found a strong, positive con-
nection between formal education in ethics and subsequent
ethical behavior (Bebeau and Brabeck 1987; Rest 1984,
1986; Ferrell and Gresham 1985; Hosmer 1988; Harris
2010; Bay and Greenberg 2001; Clarkeburn et al. 2003).
Goolsby and Hunt (1992) state that Cognitive Moral
Development education programs give students a funda-
mental understanding necessary for dealing with ethically
troublesome situations. However, some have found a ten-
uous connection in formal ethics training/education and
ethical behavior (Martin 1981–1982; Arlow and Ulrich
1985). One possible explanation for this tenuous relation-
ship may lie partly in how we educate students. For
instance, Petrof et al. (1982) found that business education
fosters an egocentric rather than a society-centric set of
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values. More recently, Brown et al. (2010) found business
students to be more self-interested than students in other
fields. Moreover, the same study cited finance students as
the least empathetic and most narcissistic, and tend to carry
these character traits into the business world. Hollon and
Ulrich (1979) suggested that the emphasis on analytical
methods in business may be at the expense of training in
moral deliberation. Covey (1989) suggests that business
school faculty members who emphasize profits without
regard to consequences actually reinforce unethical
behavior. Baxter and Rarick (1987) interject that the
fragmentation of education in universities does not foster
moral sensitivity and growth, but rather our education
system fosters narrowness of perception and parochialism,
which leads to ethical insensitivity. Increasingly, it seems,
we hear the call for re-thinking business education so as to
increase the awareness of the ethical implications of busi-
ness decisions (Gentile 2009; Holland 2009). Initiatives
such as those put on by the Aspen Institute Business and
Society Program and GivingVoiceToValues.org not only
highlight the need for more in-depth ethics education but
also provide effective approaches for imparting ethics.
Education plays a role in an individual’s ethical devel-
opment. First, in terms of curricular issues, some suggest
that we need more emphasis on critical thinking skills and
analytical skills related to examining an issue from a wider
and richer background rather than simply focusing on
technical skills (Winter et al. 1983). Second, faculty
members not only impart information/knowledge but also
serve as role models, and those who are seen by students as
purveyors of integrity and honesty do a superior job of
imparting ethics than to those who dogmatically preach
their ethical ideals (Siegel 1973).
Proposition 2 The better educated in ethics the organi-
zation’s leadership team is, the less likely it will be for
ethical dissolution to occur.
Current Ethical Value System (CEVS)
That one’s ethical value system is dynamic and evolu-
tionary is a well-accepted premise (Piaget 1948; Rest 1979;
Gibbs and Widaman 1982; Kohlberg 1984; Goolsby and
Hunt 1992; Thoma and Rest 1999; Fritzsche and Oz 2007).
An individual’s current ethical value system (CEVS) is the
framework that guides the person’s ethical choices and
behavior. It consists of the approaches or theories
employed in ethical decision-making as well as the cen-
trality of ethics in the person’s mindset. The CEVS is the
product of socialization, and includes components of past
or earlier viewpoints, a current set of ideas and ideals, and
is somewhat forward looking insofar as the ‘‘self’’ contains
elements of projected future selves.
A Comprehensive Review and Model
The person’s CEVS affects his or her approach to ethical
decision-making. Whether one subscribes primarily to the
Deontological School or to the Teleological School of
thought shapes the way in which the person evaluates a
given situation (Hunt and Vitell 1986; Ferrell et al. 1989).
That is, the ethical school of thought employed by the
person provides the criteria for making a decision. The
deontological approach holds that the ethicality of a given
decision is predicated on whether the action is ‘‘right.’’ The
popular cliché that characterizes the deontological
approach is, ‘‘It doesn’t matter whether you win or lose, it’s
how you play the game.’’ The teleological approach rep-
resents a diametrically opposed worldview. Using the tel-
eological approach, a person is only concerned about the
results of an action. An action is ‘‘good’’ if it helps achieve
the desired results. The means to achieve a satisfactory
result are irrelevant in terms of the ethicality issue. The
popular cliché that characterizes the teleological approach
is, ‘‘The ends justify the means.’’ An ethical theory gen-
erally categorized as part of the Teleological School is
Machiavellianism. Dissolution of ethical decision-making
can occur when individuals espouse an extreme and/or
misguided version of Machiavellianism, widening the gap
between private and public ethical norms when, in their
mind, the circumstances warrant. That is, they would deny
the relevance of ethics in their decision-making process;
however, ‘‘Machiavelli would not have supported a general
maxim that the end justifies the means. He simply believed
that our morality was dangerously dogmatic, impractical
and irresponsible’’ (Harris 2010, p. 134).
The rightness of a given decision is predicated on which
ethical theory one employs. For instance, for the person
who employs Ethical Egoism (a Teleological Theory), the
rightness of a decision is based on whether it furthers the
good of the individual. So, if the Ethical Egoist believes it
is in his or her personal best interest to lie to a customer,
then he or she deems that to be the right course of action. A
person who subscribes to the Kantian Approach to ethics
(in the Deontological School), will likely reject lying as
unacceptable because it would imply that doing so should
be the universal standard.
While a person’s CEVS in general provides the basis for
ethical decisions, in some cases, the person engages in
fragmentation—that is, separating different elements of
one’s life so as to be able to emotionally live with taking
action that produces harm (Opotow 1990). When this
happens, it allows the person to ‘‘live with him/herself.’’
Fragmentation means that the person might separate his or
her religious life from everyday ethical decisions because
of the tenets of the religion and his perceived necessity of
engaging in behavior that is in conflict. So, the person has
his or her ‘‘faith self’’ and his or her ‘‘professional self.’’
The ability and willingness to do this is part and parcel of
237
the person’s gestalt. Similarly, Stevens et al. (2012)
explained the process of moral disengagement (Bandura
1999) in the positive relationship between psychopathy and
unethical decision-making. This fragmentation, if wide-
spread in an organization, can help to create an amoral or
even immoral business environment where everyday
human morals do not apply; certainly adding to the dis-
solution of ethical decision-making.
Proposition 3 The collective CEVS of the leadership of
an organization has a direct impact on whether that
organization falls prey to ethical dissolution.
Degree of Ethical Sensitivity
Ethical sensitivity is the degree to which the person or
group is aware of the ethical implications of an issue, the
centrality of ethics in the person’s decision-making, and the
likelihood of taking those ethical implications into con-
sideration when making decisions. Clarkeburn (2002,
p. 450) explains ethical sensitivity thusly, ‘‘in measuring
ethical sensitivity we need to insure that we measure the
identification of ethical issues, not the ability to recognize
or prefer ethical facts among other facts, etc.’’ Hunt and
Vitell (1986, p. 781) state, ‘‘When placed in a decision-
making situation having an ethical component, some peo-
ple never recognize that there is an ethical issue involved at
all.’’ They surmise that ethical sensitivity is a personal
characteristic that enables people to recognize the existence
of an ethical issue, and this is a precursor to the ethical
decision-making process. Bebeau et al. (1985) in their
study of dental students found that: (1) ethical sensitivity
and cognitive moral development could, but need not, be
correlated with each other; and (2) ethical sensitivity can
be learned through the socialization process. Clarkeburn
(2002) points out that a person can be skilled in interpreting
the ethical issues in a situation but unskilled at working out
a balanced view of a moral solution and vice versa.
The decision-maker’s degree of ethical sensitivity is key
to our model, since it plays a vital role in whether an
individual recognizes the ethical component of a given
decision. Sparks and Hunt (1998) suggest that recognition
of an ethical issue is one major factor, but it is only the
starting point of ethical sensitivity, and is not sufficient to
encompass the concept. A person’s degree of involvement
and motivation to consider ethical issues are also compo-
nents. Their findings also found ethical sensitivity to be
positively related to empathy and, perhaps most important,
that it can be learned. Therefore, we can conclude from
their study that ethical sensitivity is affected by socializa-
tion, which would suggest that exposure to the need to
bring ethical values to bear on decisions is something that
can be taught, or at least bolstered through a training
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process. Interestingly, however, their results also found
ethical sensitivity to be negatively related to formal train-
ing in ethics. The implications of this finding point to the
importance of the everyday operating environment, above
and beyond training programs. That is, informal mentor-
ships and leadership by example may be better suited than
formal training programs to set the ethical tone in
organizations.
Also related to the concept of ethical sensitivity is the
concept of the universe of moral concern—the group or
groups of people for whom an individual feels a moral/
ethical responsibility (Knight 2000–2002). Susan Opotow
(1990) examined the concept of ethical inclusion/exclu-
sion, which is related to the universe of moral concern.
Ethical inclusion/exclusion is the process of either includ-
ing or excluding certain individuals within one’s universe
of moral concern. She proposes that the process of moral
inclusion/exclusion is borne out of moral flexibility, which
she points out can be both good and bad. Moral exclusion is
a process that requires a decided lack of empathy—a
characteristic that is positively related to ethical sensitivity.
Bandura (1990) also discusses the process of ethical
exclusion. People attempt to obscure personal responsi-
bility by diffusing responsibility—sharing the culpability
through various mechanisms. Under conditions of dis-
placed responsibility, people view their actions as spring-
ing from the dictates of authorities rather than from their
own personal responsibility, quite similar to Milgram’s
aforementioned agentic shift. They also disregard or
downplay consequences of their actions, and will blame
and/or dehumanize the victim of their actions.
Ultimately, the recognition of an ethical issue is the first
step in making ethical decisions. If this step in the process is
skipped, many unethical choices may be made within an
organization with virtually no awareness of their commission.
Proposition 4 The relative absence of ethical sensitivity
in the decision-making of organizational leadership will
tend to lead to ethical dissolution in the organization.
Self-Concept
That self-concept is a major driver in human behavior has
long been well established. According to Pride and Ferrell
(2009, pp. 194–195), ‘‘self-concept (sometimes called self-
image) is a person’s view or perception of himself or
herself. Individuals develop and alter their self-concepts
based on an interaction of psychological and social
dimensions.’’ Marcus and Narius (1986) expand on this by
stating that there is not a single self or a stand alone
authentic self. They propose that self, rather than having
stasis, is constantly in a state of flux affected by the context
or situation. Being able to adapt is necessary to continue
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one’s identity over time. Dunning (2007a) supports this
view and posits the concept that much of individual
behavior seeks for consistency of self-image or what he
calls belief harmonization, described as a process of
arranging and revising one’s needs, beliefs, and personal
preferences into a cohesive cognitive network that miti-
gates against cognitive dissonance. Carver and Scheier
(1998) posit that the operant phase of self-regulation refers
to any sort of action that seeks to reduce (or, in the case of
negative standards, increase) discrepancies between a
perceived aspect of self and some perceived external
standard. Kruger et al. (2007) refer to that standard as
sacrosanct beliefs and posit these are the core set of beliefs
about oneself that an individual will seek to support.
Dunning (2007a) presents three elements that are part of
this process of regulating behavior related to self-concept.
They are: self signaling—making choices and taking
actions to support the self concept; endowment effect—the
tendency to assign more importance to an object once a
person owns it; and affirmation effect—taking an action to
validate his or her self-image. Dunning (2007b) proposes
that the strength of the self-image has an impact on the
actions one takes to support that self-image. If one has a
strong self-image, his/her actions will be in accordance
with that, but if one has a weak self-image, one is likely to
manufacture actions that support the self-image one hopes
to validate. Jackson et al. (2006) provide a generally rep-
resentative description of the four elements: Perceived
Self—who the person views himself to be; Looking-Glass
Self—who the person thinks others view him; Real Self—
who the person actually is; and Ideal Self—who the person
would like to be. Of these four, the first three have to do
with where the person is at a given point in time. The
fourth element, the Ideal Self is related to where a person
hopes to be, and thus is really a future self.
Self concept theory is related to the concept of narcis-
sism. Narcissism has been described as ‘‘a disturbance of
the self that arises from usually pervasive and significant
parental failings to provide a loving, accepting and secure
context for development’’ (Godkin and Allcorn 2011,
p. 560). The clinical definition of narcissism refers to ‘‘a
pervasive pattern of grandiosity (in fantasy or behavior),
need for admiration, and lack of empathy’’ (First and
Tasman 2004, p. 1258). While a healthy amount of nar-
cissism is expected, almost essential, in our business
leaders, extreme narcissism has been linked to unethical
behavior (Amernic and Craig 2010). Specifically, the
extreme narcissist will behave unethically to achieve the
spoils of their business performance such as profit or rep-
utation (Chen 2010). However, in so doing, they exhibit a
false self, since their narcissism requires the admiration of
their peers that comes with the perception of high ethical
and moral standards and behavior.
A Comprehensive Review and Model
In discussing self-image, we generally focus on ele-
ments related to a positive self-image, yet there is an aspect
of self-image that is concerned with avoiding a negative
self-image. Quinlan et al. (2006) examined self-concept
theory in light of the theory of planned behavior. They
found that individuals actively engage in behavior that
relates to some future self. The process involves an
assessment of how much one values a potential/future self
and what is the likelihood that the person might achieve
that potential self. That process might result in a person’s
taking a negative action if it is perceived as leading to a
projected negative image. That is, if the person believes
that he or she will actually become a person who manifests
some negative self (i.e., is destined to manifest a ‘‘bad
self’’) then the person will actually engage in negative
(unethical) behavior—in effect, the person is caught up in a
self-fulfilling prophecy.
Markus and Narius (1986) predicted that higher expec-
tations of a negative (feared) self induce avoidance moti-
vation, thereby reducing the motivation to engage in
current risk activity. However, the findings of their study
revealed that those who thought they would develop the
characteristics of a binge drinker were more likely to
engage in the heavy drinking behavior. They suggest that
self-concept provides interpretive frameworks for making
sense of past behavior; provides a context for understand-
ing current behavior; and help the person adapt to his or her
environment.
Proposition 5 The individual self-concept of the mem-
bers of the leadership team of an organization affect each
individual’s approach to ethical decision-making, which in
turn, affects decision-making by the group. If a sufficient
number of employees view themselves as ‘‘players’’ who
are adept at successfully skirting the rules, the organiza-
tion will tend to slide toward ethical dissolution.
Self-Efficacy Mechanisms
Self-efficacy refers to the individual’s personal sense of
empowerment to the extent to which he or she can take
actions that affect outcomes relative to his or her goals.
Trevino (1986) proposed that persons high on ego strength
(the self-regulating skills of the person) are expected to
resist impulses and follow their own convictions. They are
expected to be more consistent in the moral cognition/
moral action relationship. She also posited that those with
an internal locus of control will exhibit more consistency
between moral judgment and moral action than those
whose locus is external.
Self-control is one element of self-efficacy. By self-
control, we mean the capacity of the person to make
decisions about and regulate his or her own behavior by
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relying on internal mechanisms rather than relying on
external control. Muraven et al. (1998) found that when a
situation demands two consecutive acts of self-control,
performance on the second act is frequently impaired. This
is found even if quite different spheres of self-control are
involved. The implication is that widely different forms of
self-control draw on a common internal but limited
resource (they call this ‘‘self-control strength’’). According
to Muraven and Baumeister (2000) self-control operates
like a muscle or strength—controlling one’s own behavior
requires the expenditure of some inner, limited resource
that is depleted afterward. Further, they propose that
simultaneous attempts at self-control suffer relative to
individual attempts. Because self-control strength is typi-
cally regained more slowly than it is used, continuous self-
control efforts suffer over time. They also suggest that self-
control strength can, like a muscle, improve with repeated
practice and rest. Our generally overworked culture, where
individuals wear lack of sleep and working long hours like
a badge of honor, can certainly share in the blame for the
dissolution of ethics.
Seligman (1975) presented the Theory of Learned
Helplessness. According to Seligman, a person learns from
exposure to an uncontrollable situation that outcomes are
not generally contingent on his or her own actions. Expo-
sure to uncontrollable punishments (such as uncontrollable
stresses) or even unsuccessful efforts to alter one’s mood
might result in the learning of non-contingency between
actions and the outcome, so that people learn to not exert
self-control. For a person engaged in learned helplessness,
his or her locus of control has shifted in some measure to
the external. In effect, when one engages in learned help-
lessness, his or her personal self-efficacy decreases. Taken
together, these outcomes could lead to a weakened internal
moral compass.
Jones and Ryan (1997) introduce the impact of Moral
Approbation—the desire for moral approval from oneself
or others. Individuals are moral actors within organizations
whose ethicality is affected by others in the organization.
Their argument is grounded in three observations: (1) the
vast majority of adults are at Levels 3 or 4 of Kohlberg’s
(1971) moral development scheme; (2) human beings are
limited in their capacity to process information and there-
fore rely heavily on decision-making heuristics to simplify
the process; and (3) organizations can be ‘‘designed’’ for
ethical behavior through organizational goals, communi-
cated values, and adopted structures and strategies. It
seems reasonable that if a person seeks social approval
from a group or organization which upholds a high ethical
standard, then he or she will likewise uphold that standard
and vice versa.
Individuals who have been successful in the past will
tend to continue in the behavior which brought them
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240 R. W. Jackson et al.

success—success is reinforcing. This certainly applies fall prey to ethical dissolution than those whose orientation
when it comes to ethical dissolution. Speaking of the effect is short term.
of success and/or failure, Dunning (2007a) suggests that
past successes lead people to positively reassess their Risk-Taking Propensity
feelings of competence, while failures lead people to
negatively reassess their feelings of competence and like- One element of ethical dissolution that has not received
lihood of future success. He refers to this as ‘‘belief har- much attention in the ethics literature is the issue of the risk-
monization.’’ Assuming success was achieved ethically, taking propensity (conversely, risk aversion) of a person
this success will increase self-efficacy in a healthy manner involved in ethical decision-making. Given that unethical
and decrease the likelihood of ethical dissolution in the decisions carry some risk, it is curious that this has not been
organization. more fully examined. The research on risk-taking propensity
has uncovered some interesting and sometimes conflicting
Proposition 6 An organization with a leadership team
findings. For instance, Fritzsche and Becker (1983) found
with a high level of self-efficacy is less likely to fall prey to
that managers appeared to respond in a more ethical manner
ethical dissolution brought on by groupthink than will
as the dilemma they faced became more risky. Similarly,
organizations with employees with relatively low levels of
among the findings of Smith et al. (1999) was the fact that
self-efficacy.
MBA students appeared to make more ethical decisions
when the dilemma they faced became increasingly risky.
Short- Versus Long-Term Orientation
However, Quinlan et al. (2006) found that risk-taking was
ameliorated by self-image, and can serve to facilitate either
Whether an individual or an organization utilizes a short-
ethical or unethical behavior related to the self-image of the
or long-term approach to decision-making has a major
individual. What they suggest is that the connection between
impact on the decisions made. Bommer et al. (1987) argue
ethical behavior and risk-taking is not a simple one. It is
that where short-term goals for profit and performance
impacted by the current self-image of a person as well as the
predominate, making the ethical choice might be important
projected self-image (what they expect they will be at some
so long as it does not interfere with the primary goal of
future time). If the risky decision validates a self-image of
short-term profit. Organizations taking the long-term view
being a ‘‘daring’’ person and is not checked by an image of
tend to make decisions which, while often being relatively
being a ‘‘good’’ person, then there may well be a greater
costly in the near term, will yield payoffs in the long term
tendency to engage in unethical behavior. An additional
that more than compensate for short-term losses. Individ-
factor that warrants discussion here is the corporate psy-
uals who take the long-term view buy into the concept of
chopath. Defined by Boddy (2005) as a psychopath who
delayed gratification, and believe that sacrifices now will
works and operates in the organization. In their comparison
pay dividends later. Bearden et al. (2006) suggest that a
of excessive narcissism to psychopathy, Andrews and Fur-
long-term orientation affects individual ethical decision-
niss (2009) refer to unethical business leaders as superfi-
making because unethical behavior violates traditional
cially charming, grandiose, deceitful, remorseless, void of
values and can have a negative impact on future relation-
empathy and, most relevant to the discussion here, irre-
ships. Nevins et al. (2007) proposed that work ethic and
sponsible and impulsive (implying a high degree of risk-
conservatism are antecedents of a long-term orientation
taking). Despite the complexity of the issue and its inherent
(LTO). How people deal with time horizons is one of the
mixed findings, we contend that an excessive number of
most salient values they develop. Some opt for more
risk-taking employees could contribute to ethical
immediate satisfaction while others are into delayed grat-
dissolution.
ification. According to Nevins and her co-authors, a long-
term orientation (LTO) is the most widely cited framework Proposition 8 Organizations with leaders who are risk-
for how people value time. In their research they found that takers will be more likely to experience ethical dissolution
time-orientation is connected to ethical value systems. than those organizations whose leadership team is rela-
Specifically, they assert that individuals with a strong work tively more risk averse.
ethic, who prize planning and tradition, and who were
characterized by conservatism tend to possess higher levels
of ethical values. Alternately, organizations with an inor-
Organizational Factors
dinate number of individuals with a short-term orientation
would seemingly be more vulnerable to ethical dissolution.
One of the primary elements of the organization is its
Proposition 7 Organizations whose leadership team culture. Culture is comprised of three separate, but inex-
generally employs a long-term orientation are less likely to tricably-related components: Societal Culture; Industry

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A Comprehensive Review and Model
Culture; and Organizational Culture. As mentioned previ-
ously, culture as viewed here is not a monolith. While the
culture of the organization is critical, it does not arise in a
vacuum. It is derived from the societal culture as well as
the culture of the industry in which it operates. In addition,
while the culture of the organization affects each individual
member of the organization, individual members of the
organization collectively have an impact on that organi-
zation’s culture. And, not to put too fine a point on it, the
individual who is working outside of his or her native
culture is simultaneously affected by the home country
culture as well as his or her host country culture.
Societal Culture
It is almost axiomatic that societal standards shape the
ethical standards of both individuals and organizations
operating within that society (Brenner and Molander 1977;
Schweitzer and Gibson 2008; Jordan 2009). Victor and
Cullen (1988) describe social norms as one of the ante-
cedents of the ethical climate in a corporation, and suggest
that organizational cultures reflect the myths and rules of
the society in which they operate. Ferrell and Gresham
(1985) include the Social and Cultural Environment as the
initial input to the ethical decision-making process in that
social and cultural environment helps determine whether a
given issue is an ethical or moral problem.
Rest et al. (1986) point out that societal standards evolve
over time and in such a way that what is considered the
standard in one society will not necessarily be accepted in
another society. Kathleen Getz (1991) points out that not
only are international codes of conduct different they are
not equivalent. She suggests that multinational enterprises
are morally bound to recognize the differences in codes of
conduct around the globe. Dunfee et al. (1999) propose that
ethical conduct flows from a social contract based on an
amalgam of an understood, societal ethical standard that
guides the norms of action of one person toward another.
Proposition 9 Societal culture impacts both the culture
of the industry and the culture of the organization and its
employees. A societal culture that accepts less than ethical
behavior will either directly or indirectly contribute to
ethical dissolution in the organization.
Industry Culture
While industries generally consist of independent organi-
zations, these organizations interact in such a way that they
form a pattern of behavior and set of operating norms.
Industry culture and practices have an impact on the cor-
poration’s ethics as well as on the ethics of individuals
(Brenner and Molander 1977). Hunt and Vitell (1986)
241
include in their model the elements: Cultural Environment;
Industry Environment; and Organizational Environment.
These elements along with Personal Experience provide
the basis for the person’s perceiving an ethical problem;
recognizing consequences of it; and determining alterna-
tive solutions to that problem. Naturally, it follows that an
organization’s level of ethical decision- making would be
related to not only the overall ethical climate of society but
also the industry in which it operates.
Proposition 10 An industry whose culture does not
encourage ethical behavior will contribute to the ethical
dissolution in organizations comprising that industry.
Organizational Culture
It is widely accepted that organizational culture shapes the
ethical climate within an organization. Hunt et al. (1989) as
well as Ferrell et al. (1989) suggest that corporate values
that are a part of the corporate culture are ubiquitous within
the firm and have an impact on the corporate commitment
of employees. Trevino (1986) suggests that the ethical
culture provides a social context in which ethical decisions
are made and this context either supports ethical behavior
or mitigates against it. Mascarenhas (1995) points out that
the culture of the organization establishes an ethical
framework and creates an ethical setting in which decisions
are made.
Gorman et al. (2008) concluded that individuals have
greater recall for normative social information than for
non-normative information. The importance and hence
compliance with social norms has evolutionary roots and is
‘‘hard-wired’’ into the human psyche. Thus, individuals
will seek out information on proper behavior in a given
setting. Organizational culture provides a large part of that
information. Andreoli and Lefkowitz (2009) argue that an
organization’s ethical climate is as critical in shaping
behavior of those in the corporation as is a corporate code
of ethics. Victor and Cullen (1988) point out that the eth-
ical climate in an organization arises from the history of the
organization and of the individuals who are part of the
organization. The climate is enhanced by the homogeneity-
producing processes of selection, socialization, and attri-
tion of those who comprise the organization. Lynn and
Oldenquist (1986) state that the corporate ethical culture
plays a role in the social cohesion of individuals within the
organization.
Paine (1994) argues that ethics is an essential element in
management. The efficacy of an ethics program is directly
related to management involvement and commitment. The
problem, however, is that many managers in seeking to
establish an ethical standard in the corporation have
developed a compliance mentality. That is, rather than
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seeing good ethics as a pervasive part of the organization,
many managers see it as something that has to be done to
satisfy certain outside entities, and as a result establish an
ethics program based on putting checks in the right boxes.
Organizations that do not have a well-defined, heavily
engrained strong standard of ethics are, in effect, leading
their people to engage in unethical behavior. Elci and
Alpkan (2009) pick up on this theme by pointing out the
critical role of upper management in creating an ethical
climate, and they suggest that the ethical climate has an
impact on employee satisfaction.
The presence of flawed leaders can greatly undermine
the ethical climate of an organization. For instance, Godkin
and Allcorn (2011, p. 560) propose that ‘‘organizational
identity shifts in response to destructive narcissistic exer-
cise of power’’ and that ‘‘unethical behavior becomes
institutionalized’’ as a result. Likewise, Boddy et al. (2010)
propose that corporate psychopaths negatively impact
organizations internally as well as externally. Perhaps some
solace can be taken in the finding that ‘‘followers do seem
to distinguish between authentic and inauthentic displays
of ethical leadership’’ and that less authentic leadership (in
this case in the form of Machiavellian leaders) has been
found to make leadership less impactful for subordinates
(Hartog and Belschak 2012, p. 45). In other words, when
subordinates sense that a leader is inauthentic, they are less
likely to use that leader as a role model for their behavior.
Victor and Cullen (1988) developed a model of ethical
climate types and suggested that there are three types of
ethical climate: (1) Individual—the employee is the refer-
ent for ethical decision-making; (2) Local/Organiza-
tional—ethical decisions rests in the organizational
standard; and (3) Cosmopolitan—these boundary spanners
refer to the external marketplace of ideas. Several authors
argue that the ethical values promoted within an organi-
zation have a direct impact on employee morale, commit-
ment, and ethical decision-making by employees (Ferrell
and Skinner 1988; Hunt et al. 1989; Baucus and Beck-
Dudley 2005).
Proposition 11 An organization whose culture accepts
less than ethical behavior on the part of its management
team will be more subject to ethical dissolution than those
organizations that value a high standard of ethics.
Approach to Decision-Making
Another aspect of corporate culture that has an impact on
ethical decision-making within an organization has to do
with the value placed on making decisions quickly. There
is empirical support for the notion that speedy decisions are
related to strong performance, especially in a volatile
competitive environment (Bourgeois and Eisenhardt 1988;
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R. W. Jackson et al.
Eisenhardt 1989; Judge and Miller 1991; Hough and Og-
ilvie 2005). While these studies factor in issues like the
context and personality characteristics of decision makers
in organizations, they link the speed of decision-making to
the effectiveness of decision-makers. While this, in and of
itself, does not have any real impact on ethics, the speedier
the decision, the less time there is for considering the
implications and possible unintended consequences of a
given course of action. Thus, awareness of the ethical
overtones of a decision may simply not be given time to
come into focus. Mintzberg (1978, p. 948), although not
addressing the issue of ethics per se, does suggest that the
emphasis on speedy decisions may result in harmful deci-
sions, ‘‘the aggressive, proactive strategy maker—the hero
of the literature on entrepreneurship—can under some
conditions, do more harm than the hesitant, reactive one.’’
Perhaps not coincidentally, it has been argued that the
corporate psychopath has often been promoted quickly to
leadership based at least in part on his/her ‘‘cool deci-
siveness’’ (Boddy 2011, p. 257).
Proposition 12 A decision-making approach that values
quick decision-making which does not allow adequate time
for consideration of ethical implications of actions will be
more likely to lead to ethical dissolution than a decision-
making approach that allows time for examination of the
ethical implications of a decision.
Organizational Structure
The way an organization is structured has an impact on the
ethicality of the decisions made by members of the orga-
nization (Victor and Cullen 1988; Baucus and Beck-Dud-
ley 2005). In the words of Stephens and Lewin (1992, p. 2),
‘‘Perhaps unethical choices in organizations are often made
not because of human evil or unethicality, but because
ethical decision-making is cognitively complex and
strongly affected by organizational design.’’ When we
speak of organizational structure, we are talking of the
arrangement of individuals and groups as well as the
assignment of tasks, and the patterns of communication.
The structure of the organization can impact its level of
coordination and quality of communication (Blau and Scott
1962).
Robertson and Anderson (1993) suggest that organiza-
tional design features impact ethical behavior. In their
study of sales forces, they conclude that more bureau-
cratically-controlled salespeople advocated more ethical
behavior than those subject to less direct supervision, and
that salespeople who perceived a more competitive envi-
ronment advocated engaging in less ethical behavior.
Weber (1995) examined how the organization of tasks and
function affected the dynamics of ethical decision-making
A Comprehensive Review and Model
within an organization. Within organizations, departments
have a separate set of tasks and functions, each department
has its own frame of reference and its own ethical standards
or guidelines that shape ethical decision-making.
Proposition 13 Organizational structure impacts the
communication and coordination dynamics within the
organization and therefore plays a role in the ethical dis-
solution in the organization.
Organizational Networks
The behavior of individuals within an organization is
directly and indirectly affected by the presence of others.
Coleman (1990) suggests that the presence of others alters
not only behavior but also performance. For instance, the
phenomenon of ‘‘choking under pressure’’ often occurs in
the presence of a ‘‘friendly’’ or ‘‘supportive’’ audience
(Strauss 1998; Butler and Baumeister 1998; Dohmen
2008). Blau and Scott (1962) suggest that networks, whe-
ther they are internal or external to the organization,
establish patterns of behavior, which, in turn, impact
individuals as they assimilate into a network.
Internal networks play a pivotal role in disseminating
the ethical culture throughout the organization. The power
of the internal network to disseminate culture and induce
compliance rests in the desire for social approval (Jones
and Ryan 1997). Brass et al. (1998) suggest that cliques
(social networks) formed in the organization have an
impact on ethical behavior. Cliques are a product of the
process of fragmentation that occurs as an organization
gradually gets larger. As the size of the network increases,
the possibility of fragmentation (individuals forming sub-
groups) increases. Cliques or social networks tend to be
formed with people who are similar, but as the size of an
organization increases, the fragmentation into cliques may
decrease the homogeneity of behavior across groups and
attitudes about ethical standards within the overall orga-
nization. The cement that holds cliques together is social
approval and strong cliques also may have more power (in
terms of numbers and united positions) and therefore may
be able to act unethically with little fear of retribution.
A characteristic of business today is the emphasis on
forming long-lasting relationships with suppliers as well as
distributors. These external networks represent another
important, albeit informal, component of the ethical cli-
mate. Steve Minett (2002) emphasizes the importance of
trust as a critical component in establishing and main-
taining a network of suppliers and distributors. Gundlach
and Murphy (1993) point out that as the relationship
between two organizations evolves from a transaction-
based to a relationship-based model, contract law princi-
ples (conforming to a set of stipulations) play a less
243
important role while ethical principles (trust; equity;
responsibility; commitment) take a more important role.
Donaldson and Dunfee (1994) address the ethical basis of
an external network and propose a normative theory of
ethics in business they refer to as Integrative Social Con-
tracts Theory (ISCT).
Dunfee et al. (1999) extend the earlier work of Don-
aldson and Dunfee (1994) by discussing the relationship of
social norms or hypernorms in the formation of social
contracts. By ‘‘hypernorms’’ they mean the absolute bed-
rock principles that are so fundamental to human existence
because they reflect a convergence of religious, philo-
sophical, and cultural beliefs. They posit that a business is
legitimated by the cooperation and consent of society,
therefore society should have some input into the norms by
which corporations operate and interact.
External networks impact the ethical decision-making
framework because they provide a basis for making deci-
sions about the allocation of costs and benefits for each
party to the contract, and this allocation reflects the values
of the network. Implicit in these contracts is some system
of justice and fairness, so an individual organization that is
only concerned about maximizing its own good not only
puts itself in a precarious position in terms of future con-
tracts, it imperils the fabric of the external network which
has more far-reaching implications. Steve Minett (2002)
includes in his model of trust, the element of ‘‘value res-
onance’’ which he explains is the need to find network
partners whose value systems (ethical culture) aligns with
those of the firm seeking to establish a relationship.
Proposition 14 Internal and external networks of an
organization have an impact on whether an organization
falls prey to ethical dissolution because those networks
impact the dynamics of exchange both within and between
organizations.
Contextual Factors
It is well accepted that situational or contextual factors
directly impact whether a person will engage in unethical
behavior (Ferrell and Gresham 1985; Trevino 1986; Ferrell
et al. 1989; Hunt and Vitell 1993; Fisher and Lovell 2006).
We would posit that the contextual factors affects ethical
decision-making by impacting three elements in the pro-
cess. First, the context affects whether a person or group
actually recognizes the ethical element in the decision;
additionally, the context will impact the decision itself; and
finally, the context or situation affects whether, after hav-
ing made a decision to take an unethical course, the person
or group actually carries through with the decision. Among
the factors impacting ethical dissolution are: the perception
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244
on the part of employees that they are facing a highly
competitive marketplace; the perception that rewards or
gains associated with a given course of action will be
compared with the costs associated with that course of
action; and the nature of the ethical issue itself.
Perception of Market as Highly Competitive
Competitiveness both outside and inside the organization
affects the ethical behavior of that organization. In a highly
competitive atmosphere, the possibility of unethical behav-
ior increases (Trevino 1986). ENRON was a classic example
of a highly aggressive and openly-competitive setting. While
this resulted in highly productive people in terms of revenue
generated, it also set the stage for ethical abuses. In the
absence of a strong ethical climate, cutting corners becomes
simply a way to remain competitive within the organization.
Turning to external competitiveness, Robertson and
Anderson (1993) found that salespeople who perceived a
more competitive marketplace had a greater tendency to
advocate unethical behavior. Expressions such as ‘‘it’s just
business’’ are often used as a means of discounting ethical
decision-making in a hyper-competitive situation.
Proposition 15 The perception that the individual faces a
highly competitive marketplace and/or faces a high level of
internal competition will tend to foster ethical dissolution.
Perceived Opportunity for Gain
One element in judging the ethicality of a decision has to
with the individual’s assessment of the opportunity for gain
offset by the likelihood of punishment that exists in a
particular course of action. Ferrell and Gresham (1985)
proposed that opportunity has an impact on ethical deci-
sion- making. The higher the perceived opportunity for
gain (rewards minus perceived costs) on the part of the
individual, the more unethical behavior is encouraged.
Zey-Ferrell and Ferrell (1982) suggest that opportunity
results from a favorable set of conditions that limit barriers
or provide rewards. They also suggest that opportunity, as
established by the presence of rewards and/or the absence
of punishment, is a better predictor of behavior than indi-
vidual beliefs. The opportunity of considerable financial
rewards afforded by large financial organizations, ampli-
fied by increasingly volatile corporate environments, has
by cited as a key source of attraction for psychopaths
drawn to the financial industry (Boddy 2011). Among the
findings of Smith et al. (1999) was the fact that MBA
students tended to make ethical decisions based upon the
consequences of the decision rather than upon any set of
rules they may follow. Quinlan et al. (2006) proposed that
decisions about a particular course of action are made in
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R. W. Jackson et al.
the context of perceived available alternatives. Higgins
(2002) proposed that the outcome value of a decision
contributes to a person’s well-being and thus influences
behavior. Kahneman and Tversky (1979) point out that the
extent to which a person values a given alternative will
affect how he or she will evaluate the worthwhileness of
taking a particular course of action.
Proposition 16 The extent to which the person or group
believes that there is high opportunity for a valued reward
and a fairly low probability of suffering a loss is the extent
to which that organization falls prey to ethical dissolution.
The Nature of the Ethical Issue
The nature of the ethical issue has a direct impact on the
assessment of the ethicality of a particular course of action
(Ferrell and Weaver 1978; Fritzsche and Becker 1983).
Jones (1991) introduced the concept of ‘‘moral intensity.’’
Moral issues, to be recognized, must have saliency—the
extent to which it stands out from the background; must
also have vividness—the issue is emotionally interesting,
concrete, imagery provoking, and proximate in a sensory,
temporal or spatial way. Hunt and Vitell (1993) point out
that norms of ethical behavior applied in a given context
often arise from organizations, professions, and industries.
Brass et al. (1998) point out that the characteristics of the
particular issue under consideration have an impact on
whether or not the issue is deemed to have ethical over-
tones. The four characteristics they highlight are:
• Magnitude of consequences—what will be the impact
of a particular course of action?
• Social consensus—the extent to which there is agree-
ment on the ethics of an action.
• Probability of effect—the likelihood of possible nega-
tive consequences.
• Proximity—how closely connected the actors are to the
results.
The above points to a sort of ethical relativism in that,
even those who may not be overly concerned with making
ethical decisions, also have limits on just how unethical
they will allow their decisions to be.
Proposition 17 Ethical dissolution will be more likely
when decisions or actions are not perceived to have a large
impact on others and/or when the ‘‘others’’ are considered
relatively unimportant by the decision-making group.
The Proposed Model of Ethical Dissolution
The proposed model of ethical dissolution includes three
sets of factors: Organizational; Individual; and Contextual.
A Comprehensive Review and Model
Within each of these sets of factors are elements that come
together to impact the corporate ethical situation. The
factors should be viewed as a confluence that has an impact
on the individuals or groups making an ethical decision or
series of ethical decisions. So, for instance, cultural factors
as well as some individual factors have a simultaneous
impact on the likelihood that a person or group within the
organization even recognizes that an ethical issue exists. A
person or group may be unaware of the ethical overtones of
an issue, but that does not mean that such overtones are
absent. The person and/or the group may simply be una-
ware of the ethical overtones and implications of a given
decision. They may decide to take an action that would,
upon closer inspection and/or a heightened level of ethical
sensitivity, be considered unethical.
Our model contains two boxes that are labeled ‘‘Deci-
sion to Take Unethical Action’’ with the box on the right
having quotation marks around the word unethical. The
reason for this is to illustrate the fact that, while we would
argue that many times an individual or group will make an
unethical decision knowing full well that they are taking an
unethical course, there are times when a person or group
makes an unethical decision without being aware that they
are breaching ethics. That is, they fail to recognize that
they are taking an unethical course at the time they make
the decision. The fact that they do not recognize the
decision is unethical does not change the fact that they
have set upon an unethical course. So, we include two
boxes to highlight the fact that sometimes a person or
group embarks upon an unethical course without being
aware of it at the time. There are other times, however,
when a person or group makes an unethical decision
knowing full well that they are doing so.
Argyris (1982) points out that individuals often sub-
consciously operate under two different models—one they
verbally present to the outer world, and one that they
actually use to guide their behavior. The former are those
theories that Argyris (1982, p. 11) describes thusly, ‘‘…the
values and skills that they espouse, the ones of which they
are conscious and aware. I call these espoused theories of
action.’’ He points out that people assume that these are
what guides their decisions and behavior. However, he
suggests that what actually guides behavior are what he
terms ‘‘theories in use.’’ These theories in use or enacted
theories operate on a subconscious level and form the basis
of decisions. One might argue that these guide the ‘‘gut-
level’’ reaction to a situation. Argyris argues that while the
espoused theories and enacted theories are often in concert,
they are also sometimes at odds, and the person is often not
even aware of the fact that his or her actions are at odds
with his or her espoused theories until after the decision is
made or an action is taken. In other words, the person only
becomes aware of the disconnect between the espoused and
245
enacted ethics when he or she takes the time to examine the
decision, or if some unintended consequence arises as a
result of a particular course of action that highlights the
disconnect between espoused and enacted ethics. This sit-
uation serves to provide an example of ethical dissolution
as a potentially unintended consequence of everyday
activity.
The other box that does not have the word unethical in
quotation marks, refers to the fact that a person or group
might, even when aware of the ethical implications or
overtones of a decision, decide to take an unethical course
of action. Such a decision might arise from a sense that the
person or group is in the position to control the results and
any negative fallout (self-efficacy). Another factor might
be the short-term orientation of the person. If one is making
the decision only considering the short-term implications,
the reality of long-term consequences will be dismissed or
at least discounted to the point that they do not actually
factor into the decision. Self-concept also will enter into
such a decision. The person (or group) who sees himself as
a ‘‘deal maker’’ may be willing to engage in unethical
actions if it is perceived that taking the ethical route does
not support the ‘‘deal.’’ The person (or group) may see
himself or herself as a ‘‘lone wolf’’ who is not fettered by
the standards of some group and is really answerable only
to him/herself (or group). In addition, the propensity
toward risk-taking plays a part in unethical decisions. It
may well be that the propensity toward risk-taking will
manifest itself in the individual’s decisions or actions by
legitimate means when possible, or by illegitimate means
when not. However, if the person who is a risk-taker is in a
setting where risk-taking is constrained, he or she may seek
illegitimate outlets for that risk-taking propensity. So, a
corporation that discourages risk-taking by members of the
organization may actually be setting up a situation whereby
the individuals in the organization are inadvertently
encouraged to engage in unethical behavior. That is, risk-
taking propensity seeks an outlet. If the internal organiza-
tional culture is highly competitive and the person per-
ceives a high gain potential coupled with a low risk of
getting caught/punished, the individual will be more likely
to engage in unethical behavior. Suffice it to say, that the
decision to engage in unethical behavior results from a
confluence of factors that occur in a context that actually
encourages such unethical behavior (Fig. 2).
Consistent with the Theory of Reasoned Action, the
model highlights the distinction between the decision to
take an unethical course of action and the action itself.
According to Dubinsky and Loken (1989) the most
immediate determiner of performance/action is the inten-
tion formed by the person. A person (or group) may decide
to follow an unethical course. However, there are factors
that might intervene in such a way as to result in not taking
123
246 R. W. Jackson et al.

Individual Factors Organizational Factors

•Level of Moral •Culture
Development (CMD) o Societal
•Formal Education o Industry
In Ethics o Organizational
•Current Ethical •Organizational
Value System (CEVS) Structure
•Degree of Ethical •Approach to
Sensitivity Decision-Making
•Self-Concept •Organizational
•Development of Self Recognition of the Ethical Network
Efficacy Mechanisms Overtones of a Decision o Internal Network
•Short-Term vs. Long- o External Network
yes no
Term Orientation
•Risk-Taking
Propensity Contextual Factors
•Perception of Market
Decision to Take an as Highly Competitive
Decision to Take an
•Perceived Opportunity
Unethical Action for Gain
“Unethical” Action
•Nature of the Ethical
Issue

(feedback) Engaging in (feedback)

Unethical Activity

Fig. 2 Model of ethical dissolution

an unethical course of action. For example, the calculus
related to the ‘‘opportunity’’ for gain and/or the likelihood
of getting caught might change in the intervening period
between the decision and the action itself. Self-concept
may also come into play in that the person might see him or
herself as being a ‘‘deal maker,’’ while at the same time he
or she might also have a family (self-image as provider and
protector). In such a case, the specter of being caught
becomes more pronounced as the person is preparing to
take the unethical action. In addition, the person might be a
risk-taker, but experiences a crisis in an unrelated area at
the time he or she decides to pursue an unethical course of
action and this forces the person to postpone or even
abandon the unethical course of action. Based on research
cited earlier, such situations may change the likelihood of
engaging in risky behavior.
Discussion and Future Research
Given the amount of money and the number of individuals in
a position to negatively affect the ethical underpinnings of
corporations, it is perhaps surprising that we do not see more
ethical breakdowns than we do. However, the magnitude of
the ethical breakdowns that we have seen in recent times
speaks to the need to better understand this phenomenon. At
the outset of examining the topic, we must admit that
identifying a corporate failure as ethical dissolution is
somewhat difficult. For instance, the recent loss of two bil-
lion plus dollars by J.P. Morgan/Chase is certainly a cor-
porate failure, but was it a case of ethical dissolution or just
really bad business judgment? So, the concept of ethical
dissolution is somewhat illusory. At the same time, there are
sufficient examples of corporate malfeasance that do con-
stitute ethical dissolution. For example, the recent news
about WalMart’s seeming violation of the Foreign Corrupt
Practices Act in Mexico illustrates the challenge of main-
taining an ethical culture as a corporation expands into new
regions. News reports would indicate that this took place
over a period of time; involved managers high up in the
organization; and seems not to have been taken as seriously
by headquarters as should have been the case.
Much good work has been done in the area of business
ethics and this has led to an increased understanding of
ethical decision-making. At the same time, in examining
ethical dynamics in organizations, we often come away
with more questions than answers. In addition, given the
complexity of the topic, it is necessary that we deconstruct
the process of decision-making with ethical overtones so
that we may gain a better understanding of those elements
affecting the outcome of that decision-making. However,
such an approach, while necessary, invariably leads to a
rather fragmented view of ethical decision-making in
organizations. It is therefore worthwhile to occasionally try
to recombine the work that has been done into a cohesive
examination such as we have presented here.

123
A Comprehensive Review and Model
The dilemma facing researchers investigating issues of
corporate ethics is that of examining a phenomenon
involving individual decision-making while taking into
account the impact of that decision-making taking place in
the context of a corporate setting. This begs the question of
what is the appropriate unit of analysis—the individual or
the organization? The answer would seem to be ‘‘both.’’ An
underlying assumption of this study is that ethical disso-
lution, like ethical development, is a process that takes
place over time and is affected by a variety of factors.
Perhaps one could argue that companies which are con-
sistently ethical in how they do business have some com-
monalities, while each instance where ethical dissolution
occurs is unique. Having said that, there are some com-
monalities that are instructive and add to our understanding
of the phenomenon. Drawing from past research, the pur-
pose of this study is to present a model of ethical disso-
lution that draws the major factors impacting the process of
ethical dissolution into sharp relief.
The model we present considers three major factors
affecting the process of ethical deterioration in organiza-
tions. The major factors are categorized as follows: Indi-
vidual factors; Organizational Factors; and Contextual
Factors. Within each of these are a variety of elements that
coalesce in such a way as to bring about ethical dissolution.
This model draws on past research and so helps make sense
of the process of ethical dissolution and highlights the need
for further research.
Regarding individual factors, ethical development, eth-
ical education, and personality characteristics would seem
to play a major role in ethical decision-making. Further
research is needed into the whether those who have been
central players in ethical breakdowns were as ethically
developed as managers who did not get involved in such
incidents. Are they a product of earlier business schools’
lack of emphasis on ethical training? Are they the product
of the ‘‘Greed is Good’’ mentality? Did these individuals
reach the third level (Stages 5 & 6) of ethical development
as presented by Kohlberg or was their development trun-
cated at the second level? How does subsequent ethical
education impact those who reached different stages of
ethical development in the Kohlberg model? Finally, why
did these particular individuals fall prey to unethical
decision-making while countless other managers who were
exposed to the similar influences did not? These questions
require in-depth research that goes beyond the traditional
survey.
As we consider the individual personality characteristics
of corporate leaders, it would be instructive to understand
how different personality types respond to ethical dilem-
mas. Are some personality types more susceptible to bad
ethical decisions than others? While we cannot directly
change the personality of individuals in leadership
247
positions, if we understand the role personality plays, we
may be able to address potential problems before they
occur. So, comparing personality types and the specific
personality characteristics suggested in our model will go a
long way toward understanding those individual factors
that lead to ethical dissolution.
Organizational factors provide the forum for decision-
making, hence play a major role in ethical dissolution. We
assume that the societal culture plays a major role in the
ethical decision-making of an organization. However,
when societal culture is at odds with an industry’s culture
and/or an organization’s culture, how much of a role does
societal culture really play? Does this clash of cultures lead
to the fragmentation that seems to be present when ethical
failures occur? The importance of organizational structure
is well understood, but what is the impact of a hierarchical
structure versus a flat structure on ethical deterioration? Is
one type of organizational structure inherently more likely
to lead to ethical deterioration than the other? Another
question has to do with the dynamics of internal and
external networks and how they affect ethical decision-
making. Our review of the research suggests that the
composition of the internal networks plays a big role in
whether a coalition to engage in unethical behavior actually
develops and how ‘‘effective’’ such a coalition is when it
does form. However, the dynamics of how those coalitions
form is not well understood, and bears further examination.
Certainly, there are instances when a particular unethical
action involves an external network. Understanding how
those networks come together will go a long way toward
our being able to provide warning signs of an impending
ethical dissolution.
Finally, contextual factors play a critical role in ethical
dissolution. While there has been some excellent research
that examines the risk/reward aspect of ethical decision-
making, more work needs to be done. For instance, how
does that risk/reward calculus change with the entry of
multiple people into a conspiracy? In addition, how does
the delay in implementing an unethical decision affect the
risk/reward evaluation? An additional contextual factor is
related to the length of time between the decision to pursue
an unethical course of action and the implementation of
such an action. Does the length of the delay between the
decision to pursue an unethical course and the implemen-
tation of that decision play a role in whether the plan
actually is carried out? Does the delay have an impact on
the ethical sensitivity of the individuals involved? In other
words, does a delay allow for a re-examination of the
decision and the possible recognition of the unintended
consequences associated with following through with the
decision? Does the delay allow those involved to consider
the magnitude of the effect of the decision on those not
party to it?
123
248
Ethical dissolution in organizations is a process. How-
ever, it is a process that can be understood. In gaining a
more in-depth understanding of such incidents, we are in
the position to perhaps prevent some of those in the future.
The debacle with Lehman Brothers did not have to happen.
Arthur Anderson’s implosion was not a foregone conclu-
sion. As we look back on such events, we are in the
position to understand, at least in part, what went wrong.
We must begin with setting aside the easy answers of
greed, hubris, and immorality. While these all played a
part, events such as these may have been predicted and
headed off had we a deeper understanding of the dynamics
of their occurrence. We offer our model as part of this
effort.
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