Journal of Business Ethics (2005) 61: 353–368
DOI 10.1007/s10551-005-1548-7
Exposure to Ethics Education and
the Perception of Linkage Between
Organizational Ethical Behavior
and Business Outcomes
ABSTRACT. This study focused on the effects of indi-
vidual characteristics and exposure to ethics education on
perceptions of the linkage between organizational ethical
practices and business outcomes. Using a stratified sam-
pling approach, 817 students were randomly selected
from a population of approximately 1310 business stu-
dents in an AACSB accredited college of business. Three
hundred and twenty eight of the subjects were freshmen,
380 were seniors, and 109 were working managers and
professionals enrolled in a night-time MBA program.
Overall, the respondents included 438 male students and
379 female students. Exposure to ethics in the curriculum
had a significant impact on student perceptions of what
should be the ideal linkages between organizational eth-
ical practices and business outcomes. Gender based dif-
ferences were found with female students having a higher
expectation regarding what should be the ‘‘ethics prac-
tices and business outcomes’’ link. Exposure to ethics in
the curriculum had a positive moderating influence on
the gender-based effects on perceptions of ideal ethical
climate. The interaction effect showed that exposure to
ethical education may have a positive impact on males
and allow them to catch up with females in their ethical
sensitivities concerning the ideal linkage between orga-
nizational ethical behavior and business outcomes. Fur-
Harsh Luthar is an Associate Professor of Management at
Bryant University. He received his Ph.D. from Virginia
Polytechnic University, Pamplin College of Business, in the
Department of Management. His research interests include
international differences and cross-cultural issues impacting
global human resource practices, ethical attitudes of students,
and the nature of spiritual leadership.
Ranjan Karri is an Assistant Professor of Management at Bryant
University. He received his Ph.D. in strategic management
from Washington State University. His research interests
include corporate and business strategies, enterpreneurship,
ethical leadership and corporate governance.

Springer 2005
Harsh K. Luthar
Ranjan Karri
ther, consistent with the literature, the study found that
gender differences in ethical attitudes regarding the ideal
ethical climate, while significant for undergraduates,
appeared to narrow considerably for the working pro-
fessionals who were part-time MBA students.
KEY WORDS: ethical perceptions, ethical attitudes,
ethics education, gender, business students
Introduction
There is an increasing recognition that ethical
behavior on part of organizations is indispensable for
good business (Conroy and Emerson, 2004; Crane,
2004; Giacalone and Jurkiewicz, 2003; Joyner and
Payne, 2002). Indeed, companies that strive for
excellence in their business practices also tend to
manifest a strong ethical culture (van der Merwe and
Pitt, 2003). A consensus has emerged among scholars
that, in order to ensure long-term viability, organi-
zations must respond to both their economic and
non-economic environments. This requires keeping
an unwavering focus on high public expectations for
socially responsible and ethical behaviors (Brubaker,
2003).
Interest in ethics education and ethical attitudes of
business students who are likely to be future man-
agers is on the increase (Borkowski and Ugras, 1992;
Etzioni, 2002; Jennings, 2004). In part, this is
probably due to the major corporate scandals that
started coming to light in the late 1990s and the first
decade of the 21st century. It is clear that unethical
behavior on the part of corporations can lead to
financial failure and also have a profound impact on
its stakeholders and even the stability of society as a
whole (Giacalone and Jurkiewicz, 2003). Crane
354 Harsh K. Luthar and Ranjan Karri
(2004) found that business students want to be
taught skills and tools to help manage difficult and
problematic ethical situations. Since students, both
undergraduate and graduate, are the future business
leaders, it makes sense to study whether exposure to
ethical education and training can help in shaping
their perceptions of the linkage between ethical
practices and business outcomes.
The present study focuses on student perceptions
of the ethical climate on two dimensions: perception of
the existing linkage between ethical practices and business
outcomes, and, perception regarding the ideal linkage be-
tween ethical practices and business outcomes. Specifically,
we focus on how these perceptions regarding the
current and ideal ethical climate may vary due to
factors such as exposure to ethical education, gender,
and academic status.
Current and ideal ethical climate
Current ethical climate
The first dimension of ethical climate centers on the
perceptions of subjects regarding the existing linkage
between business ethics practices and business out-
comes in society. Having insights into the state of
current ethical climate has value for several reasons.
First, if a strong link is perceived between current
business ethics practices and business outcomes on
the part of managers, it implies that ethical behavior
is not only desired for its own sake and the right
thing to do, but it actually gets rewarded in a tan-
gible and material way. In a free market economy,
where profitability and financial success of an orga-
nization is synonymous with survival, this is not a
trivial argument (Blanchard, 2001).
Second, the perceived direction of the current
relationship between ethical practices and business
outcomes can give an indication of the general state
of society and the strength of its moral values. In a
society, where the perceived link between business
ethics practices and business outcomes is weak or
even negative, the choices for individuals and
organizations to act ethically while pursuing financial
goals will be more limited. In other words, the re-
ward structure embedded in the business environ-
ment will provide little incentive for organizations
and individuals to explore ethical dimensions of
business decisions to ensure socially responsible
behavior (Paine, 2000).
Third, the strength of the perceived current rela-
tionship between ethical practices and business out-
comes can give some insight into the level of trust and
faith people have in important institutions of society.
This can have broad and significant consequences for
the quality of life. For example, the perceived lack of
trust in the financial statements of organizations and
cynicism about the stated philosophies and visions of
top managers can lead to lessening of investment in
the financial markets. A lack of optimism about the
future and reluctance to engage in normal business
transactions that rely on acceptance of good faith
statements and promises, in turn, can have negative
consequences for economic growth, job creation, and
the general standard of living.
Ideal ethical climate
In the second dimension, the focus is on perceptions
of the subjects regarding the ideal link between
business ethical practices and business outcomes.
Having insights into the perception of the ideal
relationship between ethical organizational practices
and desired business outcomes is important for sev-
eral reasons.
First, if people desire a strong positive linkage
between business ethics practices and business out-
comes, it suggests that ethical behavior on the part of
organizations is likely to be rewarded. For example,
in a society where people strongly desire a clear
positive link between business ethics practices and
business outcomes, it is likely that business success
may in part depend on organizations acting ethically
(Blanchard, 2001).
Second, perceptions of what should be the
direction and strength of the relationship between
business ethics and business outcomes provide in-
sight into the state of society and its moral values. If
in society, the desired ideal link between business
ethical practices and business outcomes is weak, it
would be tantamount to giving license to business to
act in any way that enhances its profitability at the
expense of other important stakeholders. This
underlying current would influence the choices
made by individuals and organizations in pursuit of
their financial goals.
 Ethics Education and Linkage Between Organizational Ethical Behavior and Business Outcomes
Third, the strength of perceptions of what should
be the ideal link between ethical practices and business
outcomes can indicate the moral aspirations of indi-
viduals in that society and where society wants to
move in the future. Therefore, an assessment of the
moral and ethical orientation of society is important
for organizations. A public that is dissatisfied with
business practices can make demands of its political
leaders to punish organizations and their leaders who
transgress morally, ethically, and legally. Many of the
laws that were passed to regulate businesses in the 19th
and 20th century exemplify that point. The trend to
scrutinize businesses and regulate them continues
unabated in the 21st century as well. The Sarbanes-
Oxley Act of 2002 and the ethics rule proposed by the
New York Stock Exchange were a direct conse-
quence of public reaction to the gross misconduct of
top managers in a number of large and visible corpo-
rations (Brubaker, 2003).
Literature review and hypotheses
Gender and ethical perceptions
The differences between males and females in their
ethical orientations have historically been the subject
of discussion (Gilligan, 1982). Scholars continue to
investigate the perceptual and behavioral implica-
tions of ethical attitudes and their correlation to
gender (Akers and Eaton, 2003; Conroy and
Emerson, 2004; Ergeneli and Arikan, 2002; Peterson
et al., 2001). A number of studies have found that
females tend to be more ethically sensitive than
males (Akaah, 1989; Arlow, 1991; Betz et al., 1989;
Borkowski and Ugras, 1992; Conroy and Emerson,
2004; Jones and Gautschi, 1988; Luthar et al., 1997;
Peterson, et al., 1991; Ruegger and King, 1992). A
few studies have found no differences and have been
inconclusive (Derry, 1989; Fritzsche, 1988;
McNichols and Zimmerer, 1985).
Integrative reviews of the literature and meta-
analyses of studies where gender is included in the
analysis, however, clearly suggest that there are
various differences between males and females in
terms of ethical attitudes and perception of ethical
climates, although many of these differences may
very well be context specific (Luthar et al., 1997).
Related to the study of perceptions of ‘ideal’ state of
355
ethical climate, Prasad et al. (1998) examined gen-
der-based effects on perception of what they termed
‘just society’ and found significant differences
between men and women.
Ford and Richardson (1994), in their review of 14
empirical studies, found that in 7 of the studies there
was evidence that females were likely to act in a
more ethical manner than males. In a meta-analysis
that included 47 empirical studies from 1984 to
1995, Borkowski and Ugras (1998) found that,
overall, women demonstrate higher ethical attitudes
and moral behaviors than men.
A number of scholars have explained the potential
gender differences in social and ethical behaviors by
reference to the socialization process of males and
females as they are growing up (White and Dooley,
1993). Gilligan (1982) originally argued that men
and women, in the way they are socialized and
raised, develop fundamentally different conceptions
of ethics. Men tend towards the ethics of justice,
which emphasizes resolution of problems through a
focus on rules, rights, fairness, and justice. Women,
on the other hand, adopt roles similar to their
mothers and tend towards the ethics of care, which
emphasizes nurturing relationships. Therefore, wo-
men are likely to view ethical situations and dilem-
mas from the perspective of relationships,
responsibilities towards others, and compassion
(Gilligan, 1982).
Several studies have supported Gilligan’s thesis
that the ethics of care and the ethics of justice moral
orientations are significantly related to gender
(Langdale, 1983; Lyons, 1983). It was found in these
studies that a ‘‘care’’ orientation was a major factor in
female thinking while a ‘‘justice’’ orientation col-
ored male thinking. In the same vein, a study
involving over 400 MBA students found that more
women are likely to act to address unethical business
practices than men (Jones and Gautschi, 1988).
Other findings in the literature suggest that men are
more focused on money and career whereas women
tend to be more interested in maintaining relation-
ships and helping others (Betz and O’Connell, 1987;
Betz et al., 1989).
Gender socialization theory leads to the conclu-
sion that males and females, as adults, will bring
different values to their work roles (Dawson, 1997;
Weeks et al., 1999). Empirical studies in support of
this notion suggest that men and women may be
356 Harsh K. Luthar and Ranjan Karri
bringing different moral lenses to ethical situations.
Based on this discussion, we formulate the following
hypothesis.:
Hypothesis 1: Overall, females will perceive
stronger positive links between ethical prac-
tices and business outcomes on both dimen-
sions of ethical climate (current and ideal)
when compared to males.
Role of age, academic status, career status,
and potential interaction with gender
There has been much interest in the ethics literature
on how age, academic status of students, and career
stage, influences one’s ethical attitudes and judg-
ments (Luthar et al., 1997). Dawson (1997) has
reasoned that as men and women get older and gain
work experience, they become more sensitive to
ethical issues and their ethical values become similar.
Therefore, according to Dawson, the gender dif-
ferences in ethical attitudes would be the highest for
younger age groups but would tend to converge as
both men and women get older and gain similar
kinds of work and life experiences.
Dawson’s argument that gender differences
should become narrower with age and experience
is generally consistent with the literature that has
examined the impact of age on ethical attitudes.
Several studies have found that older people hold
higher ethical values than younger people do
(Conroy and Emerson, 2004; Harris and Brown,
1990; Lane, 1995; Longenecker et al., 1989).
Petersen et al. (2001) found support for Dawson
(1997) and concluded that while women held a
higher level of ethical beliefs at a younger age than
men, this difference was not present for older age
groups.
Academic status and/or career stage have been
used as proxies for age in some studies and scholars
have explored how these correlate to ethical values.
For example, it has been found that younger man-
agers may view the qualities of trust and honor as less
important to them than making money and
advancing their career (England, 1978; Johnson
et al., 1986). A study of 513 executives used career
stage as a surrogate for age (Barnett and Karson,
1989). The study found that early career stage
subjects acted significantly less ethically in one of the
scenarios than later career stage subjects who
responded more ethically in all scenarios. Similarly,
Arlow (1991) found age to be negatively related to
one’s Machiavellian orientation. Those under the
age of 24 had significantly higher Machiavellian
scores than those aged 24 or over. Ruegger and King
(1992) in their study of 2196 business students found
that age was significantly correlated to ethical atti-
tudes and perceptions.
Borowski and Ugras (1998) conducted a meta-
analysis of empirical studies related to business
students and ethics in the period 1985 through
1994 and clarified this finding. The meta-analysis
found that, overall, older students exhibit stronger
ethical values than younger students. Perhaps
ethical values do change with age but it is not easy
to determine the underlying factors responsible for
such change. Some scholars have suggested that
work experience has the most influence on how
people’s ethical values undergo a transformation.
For example, in a comparative study of under-
graduate and MBA students, college freshmen and
juniors were found to be more justice-oriented
(focusing on fairness and equality) whereas the
MBA students tended to be more utilitarian and
were interested in maximizing benefits and mini-
mizing costs in their approach to ethical dilemmas
(Borkowski and Ugras, 1992). The authors felt
that this difference might be due to the greater
work experience of the MBA students who would
be less idealistic than the undergraduates who had
not faced the rigor of everyday work life.
The overall direction in the empirical literature
appears to suggest that with the aging process and the
accumulated life and work experiences that come
with it, there might be less emphasis on the part of
the individual on selfish interests and indeed an in-
crease in concern for the welfare of others. There-
fore, MBA students having more work experience
and being older, are more likely than undergraduate
students to see a stronger relationship between eth-
ical practices and business outcomes. As a corollary
to this and consistent with the research of Dawson
(1997) and other scholars, we would expect to see a
more pronounced effect of gender on undergradu-
ates than on the MBA students in terms of their
ethical attitudes and beliefs. Based on this, the
following hypotheses are offered.
 Ethics Education and Linkage Between Organizational Ethical Behavior and Business Outcomes
Hypothesis 2A: An increase in academic status will
result in stronger perceptions of the ideal link
between ethical practices and business out-
comes (ideal climate) as well as perceptions of
the current link between ethical practices and
business outcomes (current climate)
Hypothesis 2B: Gender differences on perceptions
of the ideal link between ethical practices and
business outcomes (ideal climate) will narrow
with increasing academic status and would be
insignificant among MBA students.
Role of ethics education in business
curriculum on ethical attitudes of students
In the early 1980s, over 500 business ethics courses
were being taught on American campuses, and a
large majority (over 90%) of the nation’s business
schools provided opportunities for some kind of
exposure to ethical training (Stark, 1993). Studies
showed that although business schools utilized a
range of methods and materials in teaching ethics
(Paine, 1988), most courses were considered super-
ficial, inadequately structured, and not well inte-
grated into the business curriculums (Murray, 1987).
While the AACSB has supported the teaching of
business ethics since the early 1980s, many business
schools do the minimum required to satisfy that
mandate and, in fact, business ethics types of courses
have been disappearing in many of the redesigned
MBA programs (Crane, 2004). AACSB has come
under heavy criticism from scholars for what many
consider are its inadequate requirements for ethical
education in business schools. Due to flexible
AACSB guidelines on teaching of ethics, only one
third of the accredited business schools currently
have a stand alone course in ethics (Mitroff and
Swanson, 2004).
Approaches to ethics education have their ori-
gins in various views of human nature and psy-
chology. Some scholars have argued that education
is a powerful force in shaping assumptions that
influence what people view as right or wrong. It
has been suggested that the moral development of
individuals is fluid and people can continue
enhancing and developing their sense of ethics at
any age due to life experiences as well as through
357
proper training, education, and guidance (Kohl-
berg, 1984; Rest, 1988). Kohlberg (1984) has
strongly argued that reaching a certain age does
not necessarily equate with a specific level of
ethical development beyond which a person can-
not go. Therefore, ethical education can be
instrumental in helping persons develop morally at
virtually any stage of their life. However, others
question whether ethics can be taught in such a
way as to significantly change attitudes and
behaviors past a certain age. Aristotle, for example,
believed that ethical behavior cannot be taught but
must be integrated into how a person is raised
from childhood (Lord and Bjerregaard, 2003).
Many modern scholars take a similar view and
suggest that by the time an individual reaches
adolescence, his or her ethical personality has been
more or less concretized, and that character once
formed cannot be changed by education (Rohatyn,
1988).
Several studies have explored the influence of
business ethics instruction on students’ ethical atti-
tudes with mixed results (Arlow, 1991; Borkowski
and Ugras, 1992; Boyd, 1981–1982; Conroy and
Emerson, 2004; Mayer, 1988; Murphy and
Boatright, 1994; Stevens, 1984; Tanner and Cudd,
1999). Some studies, for example, have concluded
that ethical education sensitizes business students to
ethical issues (Bok, 1976), and can marginally impact
actual behavior (Salmans, 1987). Murphy and
Boatright (1994) found that students having taken
business ethics courses ranked ethical issues differ-
ently than those who simply had taken a course in
which business ethics was just one component. In
support of Kohlberg’s model, there is evidence that,
overall, ethical education can influence the devel-
opment of moral perspectives among students (Rest,
1988). Some studies, however, suggest that the
effects of having taken ethics classes are limited or
short lived (Tanner and Cudd, 1999) or insignificant
(Borkowski and Ugras, 1992; Conroy and Emerson,
2004).
The mixed results on the value of exposure to
ethical education in college curriculums may be
explained by the varying strength of the ethics
exposure as well as the role individual characteristics
such as gender, age, and academic or career status
play in forming ethical attitudes, perceptions, and
orientations. Indeed, all such factors may interact
358 Harsh K. Luthar and Ranjan Karri
with each other to influence ethical attitudes and
perceptions on multiple dimensions. The view that
ethics education, when properly incorporated in the
curriculum, can make a difference in the attitudes
and behavior of business students who are the future
managers received widespread attention and support
after the recent corporate scandals. Distinguished
management scholars (Adler, 2002; Etzioni, 2002;
Mitroff and Swanson, 2004) and others continue to
strongly argue that business schools should be inte-
grating ethics across the curriculum as well as having
stand alone courses on the subject in order to ensure
that business students will be socially responsible and
ethically sensitive managers.
Based on this discussion and the literature, we
formulate the following hypotheses on exposure to
ethical education.
Hypothesis 3: Exposure to ethics in the curricu-
lum will have a significant positive effect on
students’ perceptions of both the ideal ethical
climate (perception of the ideal linkgage be-
tween ethical practices and business out-
comes) and current climate (perceptions of
the current linkage between ethical practices
and business outcomes).
Exposure to ethics education should moderate the
more cynical views that may be a function of aca-
demic status or gender. After controlling for per-
ceptions of the current state of relationship between
ethical practices and business outcomes, we expect
positive perceptions with regard to the ideal linkage
between ethical practices and business outcomes for
senior classmen who were exposed to ethics in their
business curriculum. Similarly, we expect a positive
effect on the perceptions of the ideal linkage between
ethical practices and business outcomes for males who
had exposure to ethics in curriculum.
Hypothesis 4A: After controlling for perceptions
of the current ethical climate, exposure to eth-
ics in the curriculum will positively influence
the perceptions of male students regarding the
ideal linkage between business ethics practices
and business outcomes (ideal climate).
Hypothesis 4B: After controlling for perceptions
of the current ethical climate, with increasing
academic status, exposure to ethics in the
curriculum will positively influence student
perceptions regarding the ideal linkage be-
tween business ethics practices and business
outcomes (ideal climate).
Methods
Sample description
The population of interest for this study was fresh-
men, seniors majoring in Business Administration,
and working professionals and managers enrolled in
a night-time MBA program at an AACSB accredited
college. We used stratified sampling to ensure that a
representative number of students from the freshman
class, the senior class, and the MBA program would
be included in the sample (Pedhazur and Schmelkin,
1991). Based on the stratified sampling approach,
817 business majors were selected randomly from a
population of approximately 1310 business students
to participate in the study. Respondents included
438 male students and 379 female students. Three
hundred and twenty eight of the subjects were
freshmen, 380 were seniors, and 109 were profes-
sionals and managers who were also part-time MBA
students. The instrument was administered and
completed in the classrooms with the permission of
the instructors.
Operationalization of variables
We adopted an instrument that had been used
originally in a pilot study to survey readers of Design
News (Gautschi, 1992). The instrument had been
tested further for face validity and reliability and was
administered in a study examining ethical attitudes
and perceptions of undergraduate freshmen and se-
niors in a college of business (Luthar et al., 1997).
The subjects were asked to respond to a series of
statements pertaining to the perceived linkages be-
tween ethical behavior and business outcomes, in
terms of ‘‘Is it this way’’ and ‘‘Should it be this way’’
on a 5-point Likert scale.
Because we were using a completely new and
different sample of subjects from the previous two
studies, in order to insure the integrity of the scales,
 Ethics Education and Linkage Between Organizational Ethical Behavior and Business Outcomes 359

we followed the methodology given by Luthar et al.
(1997) for scale development and conducted a
confirmatory factor analysis to verify the factor
structure. A principal components analysis was per-
formed with varimax rotation. As expected, items
measuring ‘‘what the current relationship between
ethical practices and business outcomes is’’ (CUR-
RENT) and ‘‘what the relationship between ethical
practices and business outcomes ideally should be’’
(IDEAL), consistently loaded onto two different
factors. A cutoff point of 0.40 was used for item
loadings on the factors (Nunnally, 1978). Reliability
of the IDEAL factor-based scale was 0.78 and the
reliability of CURRENT factor-based scale was
0.70. Typically in social science research, alphas of
over 0.70 are considered satisfactory (see the dis-
cussions in DeVellis, 1991; Pedhazur and Schmelkin,
1991).
The scale items for the variables measuring the
current and ideal state of relationship between eth-
ical behavior and business outcomes are provided in
Table I.
Independent variables used to explain variance in
perceptions of ethical climates (IDEAL and
CURRENT) were GENDER (male or female),
CLASS (freshmen, senior, or MBA student), and
EXPOSURE (exposure to ethical education or no
exposure to ethical education). The exposure to
ethical education was measured in the survey
instrument by asking the respondents if they had
taken a course on ethics. In a separate item, the
respondents were asked whether issues pertaining to
ethics and business had been part of any other
courses they had taken in the past. Students who had
taken a course on ethics and could also recall that
ethics was discussed as an important topic in another
course were considered to have had a greater
exposure to ethical issues than students who neither
took a course on ethics nor were aware of having
taken any courses of which ethics was an important
topic.
Analytical procedure
Multivariate analysis of variance (MANOVA) was
used to test for the effects of independent variables
simultaneously on perceptions of the ideal link
between ethical practices and business outcomes
(IDEAL) and perceptions of the current link
between ethical practices and business outcomes
(CURRENT). Analysis of covariance (ANCOVA)

TABLE I
Items comprising the two dependent variables

Current state – coefficient alpha = 0.70

Is it this way
• Good ethics is good business.
• There is a direct relationship between social responsibility of a firm and its profit performance.
• When a firm does not act ethically, it will be punished by reduced profits.
• It is necessary to be ethical to be a successful manager.
• The success of the free market and democratic institutions depend upon managers acting ethically.
• A firm needs to be ethical to be admired.
Ideal state – coefficient alpha = 0.78
Should it be this way
• Good ethics is good business.
• When a firm does not act ethically, it will be punished by reduced profits.
• It is necessary to be ethical to be a successful manager.
• At times, firms must practice price discrimination, collusion, bribery and dishonesty in advertising or contracts in
order to survive (REVERSE CODED).
• Most firms respond to ethical concerns by drafting and enforcing a code of ethics.
• Firms tend to use unethical behavior when they are faced with excessive competition (REVERSE CODED).
• Firms tend to use unethical behavior when they are faced with little competition (REVERSE CODED).
• The success of the free market and democratic institutions depend upon managers acting ethically.
• A firm needs to be ethical to be admired.
360 Harsh K. Luthar and Ranjan Karri
was used to test the main and interaction effects of
the independent variables (gender, academic status
and exposure to ethics in curriculum). This tech-
nique is useful as the dependent variable measuring
students’ perceptions of what should be the ideal
relationship between ethical practices and business
outcomes (IDEAL) is continuous and all the
independent variables are categorical. We used the
General Linear Model procedures to conduct
the above analyses. Interaction effects were
included in the model.
Results
Correlations and descriptive statistics are reported in
Table II. CURRENT and IDEAL are significantly
correlated. Notwithstanding the statistical signifi-
cance, it is important to note that the correlation
between CURRENT and IDEAL is only 0.13. This
suggests that the perceptions of what ought to be the
linkage between ethical practices and business out-
comes are not strongly related to the perceptions of
the current linkage. Gender’s (coded as 1 = Male
and 2 = Female) positive correlation suggests that
females have high expectations of the ideal rela-
tionship between ethics and business outcomes.
The mean of IDEAL is 3.84 (on a scale of 1–5)
with a standard deviation of 0.50. Higher value
represents a perception that ideally, there should be a
strong positive relationship between ethical practices
and business outcomes. The distribution of IDEAL
has a low variance and is skewed towards positive
perceptions with regard to the linkage between
ethical practices and business outcomes, suggesting an
optimistic view of the role of ethics in business. The
TABLE II
Correlations
Mean Std. Dev.
1. IDEAL 3.84 0.50
2. CURRENT 3.17 0.53
3. GENDER 1.46 0.50
4. CLASS 2.93 1.61
5. EXPOSURE 1.84 0.37
*Correlation is significant at the 0.01 level (two-tailed).
current state of linkage measured by the variable
CURRENT has a lower mean of 3.17 and a standard
deviation of 0.53. This indicates that respondents
perceive the current linkage between business ethics
practices and business outcomes in a less positive way.
The low variability in IDEAL and CURRENT
suggests a broad consensus among respondents that
ideally there should be a strong linkage between
business ethical behavior and business outcomes and
that currently that linkage is not as strong.
Table III summarizes the results of MANOVA
used to test for the effect of gender, academic status,
and exposure on the two dimensions of perceptions
of linkage between ethical practices and business
outcomes, CURRENT and IDEAL. The overall
effects of gender, academic status and exposure to
ethics in curriculum were found to be significant
(Wilks’ Lambda values and corresponding F-statistic
are significant at 0.01 level). The interaction of
GENDER and the stage of college education
(CLASS) is significant. However, the moderating
role of exposure to ethics in curriculum is not sig-
nificant. The F-statistic values for the interaction
terms involving EXPOSURE are not significant.
Table IV summarizes the tests of between subject
effects and the effects on each of the dependent
variables. All variables except CLASS do not have
a significant effect on dependent variable
CURRENT.
Analysis of covariance (ANCOVA) was used to
test for the effects of independent variables (gender,
academic status, and exposure to ethical issues in
business curriculum) on the perceptions of the ideal
linkage between ethical practices and business out-
comes (IDEAL) using the perceptions of current
relationship between ethical practices and business
1 2 3 4
0.13*
0.12* 0.06
)0.02 )0.21* 0.03
0.06 0.02 )0.03 0.17*
 Ethics Education and Linkage Between Organizational Ethical Behavior and Business Outcomes 361

TABLE III
MANOVA results. Dependent variables: CURRENT and IDEAL

Effect Wilks’ Lambda Value F Hypothesis df

Intercept 0.031 12465.89*** 2

GENDER 0.979 8.60*** 2
CLASS 0.961 8.01*** 4
EXPOSURE 0.992 3.23** 2
GENDER  CLASS 0.989 2.32* 4
GENDER  EXPOSURE 0.994 2.27 2
CLASS  EXPOSURE 0.984 1.23 4
GENDER  CLASS  EXPOSURE 0.987 2.63** 4

Design: Intercept + GENDER + CLASS + EXPOSURE + GENDER  CLASS + GENDER  EXPOSURE +

CLASS  EXPOSURE + GENDER  CLASS  EXPOSURE.
***p < 0.01, **p < 0.05, *p < 0.10.

outcomes (CURRENT) as a covariate. It is curriculum) were analyzed. Results of ANCOVA

important to treat CURRENT as a covariate in
estimating the effect of independent variables
(GENDER, CLASS, and EXPOSURE) on IDEAL.
This will help in removing the effects of CUR-
RENT, which modifies the relationship of the
independent variables on IDEAL. Main effects and
interaction effects of the independent variables
(gender, academic status, and exposure to ethics in
are summarized in Table V. Table VI presents a
comparison of mean scores on perceptions of IDEAL
between males and females and between students
who had exposure to ethics in curriculum and those
who did not. Since GENDERCLASS interaction
(Table V) was significant for IDEAL (p < 0.05), we
have also included a breakdown of individual means
by gender and academic class.

TABLE IV
MANOVA: test of between subject effects

Source IDEAL CURRENT

Type III df F Type III df F

Sum of Squares Sum of Squares

Corrected model 8.88 11 3.33*** 15.80 11 5.33***

Intercept 4161.96 1 17180.41*** 2848.61 1 10572.90***
GENDER 3.90 1 16.10*** 0.62 1 2.3
CLASS 0.41 2 0.85* 8.56 2 15.88***
EXPOSURE 1.39 1 5.72** 0.35 1 1.30
GENDER  CLASS 1.82 2 3.75** 0.73 2 1.35
GENDER  EXPOSURE 1.07 1 4.43** 0.09 1 0.35
EXPOSURE  CLASS 0.20 2 0.41 1.04 2 1.92
GENDER  EXPOSURE  CLASS .09 2 3.28** 1.29 2 2.39*
Error 195.01 805 195.01 805
Total 12241.61 817 8425.81 817
Corrected total 203.89 816 232.69 816
R squared 0.044
Adjusted R squared 0.030

***p < 0.01, **p < 0.05, *p < 0.10.

362 Harsh K. Luthar and Ranjan Karri

TABLE V
Analysis of covariance (ANCOVA) results
Dependent variables: IDEAL

Source Type III Sum of Squares df Mean Square F

Corrected model 11.50 12 0.96 4.01**

Intercept 243.32 1 243.32 1016.84**
CURRENT 2.62 1 2.62 10.96**
GENDER 3.56 1 3.56 14.86**
EXPOSURE 1.24 1 1.24 5.16*
CLASS 0.15 2 0.07 0.31
GENDER  EXPOSURE 1.00 1 1.00 4.20*
GENDER  CLASS 1.58 2 0.79 3.29*
EXPOSURE  CLASS 0.26 2 0.13 0.54
GENDER  EXPOSURE  CLASS 1.38 2 0.69 2.89
Error 192.39 804 0.24
Total 12241.61 817
Corrected 203.89 816
R squared 0.06
Adjusted R squared 0.04

**p < 0.01, *p < 0.05.

Main effects
Results of the multivariate analysis in Table III show
the statistical significance of GENDER with CUR-
RENT and IDEAL simultaneously. The separate
effects on CURRENT and IDEAL presented in
Table IV, however, indicates the significant effect of
GENDER on IDEAL only. This leads to the
conclusion that female students have significantly
higher expectations as to what should be the ideal
relationship between ethical behavior and business
outcomes. Perceptions of the current linkage between
ethical practices and business outcomes are not dif-
ferent for males or females. Therefore, Hypothesis 1 is
only partially supported. Academic Status (CLASS)
has a significant effect on the overall model
(Table III), and also has a significant effect on per-
ceptions of the current and ideal linkage between
ethical practices and business outcomes (Table IV).
Therefore, Hypothesis 2A is supported. Results of the
multivariate analysis show that EXPOSURE has a
significant effect on the overall model when both
CURRENT and IDEAL are included as dependent
variables (Table III). The separate effects of EXPO-
SURE on CURRENT and IDEAL indicate the
significant effect of EXPOSURE is on IDEAL only
(Table IV). This implies that students who were ex-
posed to ethical issues in curriculum were more likely,
than those who were not, to believe that good busi-
ness ethics should be positively related to successful
business outcomes. However, exposure to ethical
education does not change perceptions regarding the
current existing linkage between business ethics
practices and business outcomes. Therefore,
Hypothesis 3 is only partially supported. After con-
trolling for the perceptions of the current linkage, the
role of exposure to ethics makes a difference in the
perception of the ideal linkage between business
ethics practices and business outcomes. A comparison
of means of the main effects is shown in Table VI to
determine the significance of differences between the
groups for each independent variable.
Interaction effects
After controlling for the effect of perceptions of the
current linkage between ethical practices and
business outcomes, the interaction effect of GEN-
DER on CLASS is significant (Table V). This sug-
gests that gender differences in the perceptions of
what should be the ideal relationship between ethics
 Ethics Education and Linkage Between Organizational Ethical Behavior and Business Outcomes 363

TABLE VI
Comparison of estimated marginal means

Dependent variable: IDEAL MEAN Std. Error

Males (N = 438) 3.68 0.04

Females (N = 379) 3.90 0.04
Mean difference significant p < 0.01
Exposure to ethics 3.86 0.02
No exposure to ethics 3.73 0.05
Mean difference significant, p < 0.05
Males
Freshmen 3.76 0.04
Seniors 3.60 0.07
MBAs 3.69 0.09
Females
Freshmen 3.88 0.05
Seniors 3.99 0.05
MBAs 3.84 0.10
GENDER  CLASS interaction significant, p < 0.05
Males
Exposure to ethics 3.80 0.03
No exposure to ethics 3.56 0.08
Females
Exposure to ethics 3.91 0.03
No exposure to ethics 3.90 0.08
Mean difference significant for Males, p < 0.05

The covariate (CURRENT) is evaluated at its mean value of 3.17.

and business outcomes narrow with academic status.
Therefore, Hypothesis 2B is supported. Further
examination of the interaction effect as depicted in
Figure 1 indicates that the narrowing of the differ-
ence in perceptions is at the MBA level. Academic
status, in fact, may be a serving as a proxy for age or
work experience or both. While female students in
the senior class have a significantly stronger belief
than male students as to what should be the ideal
relationship between ethical practices and business
outcomes, the difference narrows down at the MBA
level. The ethical perceptions of male and female
working professionals taking classes in the part-time
MBA program appear to be converging.
Similarly, after controlling for the effect of per-
ceptions of the current state of relationship between
ethical practices and business outcomes, the results
indicate that having been exposed to ethics in courses
has more impact on males than females as suggested by
the interaction effect of GENDER and EXPOSURE.
Hypothesis 4A is supported. Figure 2 clearly indicates
the pronounced difference between males and females
in the positive increase in perception of the ideal
linkage between business ethics practices and business
outcomes. While there is an increase in the score for
IDEAL, the slope of the line indicating the increase for
male students is significantly higher. Based on the
above results we argue that exposure to ethical edu-
cation has an important influence on ethical percep-
tions regarding the ideal linkage between business
ethics practices and business outcomes, and in par-
ticular, among male students.
Exposure to ethics in curriculum does not mod-
erate the effect of academic status on the perceptions
of ideal relationship between ethical practices and
business outcomes as indicated by the interaction term
364 Harsh K. Luthar and Ranjan Karri

Interaction of GENDER and CLASS: helps in enhancing the ethical perceptions of the
Estimated Marginal Means of IDEAL students regarding the ideal linkage between business
ethics practices and business outcomes; the stage of
4.00
Females their academic career does not have any moderating
effect on the students’ perceptions of the ideal ethical
3.90
climate.

Discussion and conclusion

3.80
After controlling for perceptions of the current
linkage between ethical practices and business out-
3.70 Males comes, the expectations of the ideal linkage between
ethical behavior and business outcomes are signifi-
cantly higher among females compared to males.
3.60 This finding is in line with the literature as in a
majority of studies that have examined ethical
attitudes, women have scored consistently higher
Freshmen Seniors MBAs than men in their ethical sensitivities (Knotts et al.,
class 2000). Anecdotally, as pointed out by Conroy and
Emerson (2004), both of the major whistleblowers at
Figure 1. Interaction of GENDER and CLASS: esti- Enron (Sharon Watkins) and Worldcom (Cynthia
mated marginal means of IDEAL. Cooper) were women. The findings of the study fit
within the framework of gender socialization theory
Interaction of GENDER and EXPOSURE which suggests that males and females because they
Estimated Marginal Means of IDEAL are socialized differently bring different values to
3.95
their work roles (Dawson, 1997; Weeks et al., 1999).
Females As Gilligan has argued, due to the differences in how
3.90 men and women are raised and their different
experiences of gender roles, they develop different
3.85 notions of ethical behavior. Women are more likely
than men to view ethical issues and decisions from
3.80
the perspective of maintaining relationships, being
3.75 responsible to others, and interacting with them
through compassion (Gilligan, 1982).
3.70 Such significant differences based on gender clearly
Males
point towards an increased emphasis on the nature of
3.65
discussion and conversation that needs to occur in
3.60 organizations. For instance, the tendency of male
executives to have a less optimistic view of the cause
3.55 and effect of ethical practices and business outcomes
should be addressed more specifically to prevent
No Yes
unethical conduct. Interestingly, gender based dif-
Exposure to ethics in curriculum ferences have been found to be pronounced in many
other cultures as well. For example, in an empirical
Figure 2. Interaction of GENDER and EXPOSURE:
estimated marginal means of IDEAL.
study of Turkish managers, female managers scored
higher than their male counterparts did in their ethical
CLASSEXPOSURE (Table V). Hypothesis 4B, judgments (Ekin and Tezolmez, 1999).
therefore, is not supported. It would seem that Our study also suggests that as students grow older
exposure to ethical issues in various contexts by itself and progress through their academic career the
 Ethics Education and Linkage Between Organizational Ethical Behavior and Business Outcomes
differences in perceptions of male students and fe-
male students tend to narrow, especially at the MBA
level. This may be due to the fact that by the time
men and women are in the MBA program, more
than likely, they have had the same type of ethical
exposure in the business curriculum and probably
have gained similar work experiences as well. This is
consistent with the findings of Dawson (1997) and
other scholars who have suggested that as men and
women get older and accumulate work experiences,
their ethical values will tend towards convergence.
The study’s findings also highlight the value of
ethical education for both males and females but
especially for male students. The results indicate that
regardless of a student’s academic status (i.e. fresh-
man, senior, or MBA), exposure to ethics has a more
dramatic impact on male students allowing them to
catch up with the expectations held by female
students regarding what should be the ideal linkages
between ethical practices and business outcomes. It
is possible that males gain more from ethical edu-
cation as many ethical issues involve values of
empathy, compassion, social responsibility, and
sensitivity, which may come more naturally to wo-
men due to the way they are socialized in their
gender roles.
Although the debate on the role and the value of
ethical education is likely to continue, business
schools need to reevaluate their conceptualization of
what it means to incorporate ethical education in the
curriculum. Many business schools have eliminated a
stand-alone course on business ethics in their revised
curriculum in order to shorten their MBA programs
and make them more competitive and attractive for
potential students. However, this strategy may be
tantamount to cutting off one’s nose to spite the
face! In our study, when we measured exposure to
ethics, we took into account the fact that some
students had taken an ethics course and, in addition,
had also been exposed to ethical issues in their other
courses as well. Indeed, it makes sense to argue that
such students have a stronger exposure to ethical
education than those who simply take a course in
ethics. This leads us to speculate that the studies that
find a weaker link between ethical education and
ethical attitudes may not be measuring the differing
levels of exposure to ethical education that are
possible for students. It seems to us that a strong
emphasis on ethical education and training that
365
combines stand alone ethics courses with exposure
to ethical issues in rest of the business curriculum
would have the greatest impact on sensitizing the
students to the critical nature of ethical consider-
ations in making business decisions.
The pressure on both business schools (Adler,
2002; Etzioni, 2002) as well as the AACSB (Mitroff
and Swanson, 2004) to strengthen ethics education
requirements for business students appears to inten-
sifying. Due to well-publicized corporate scandals
and insider trading on Wall Street, business schools
have come under a fury of criticism (Etzioni, 2002).
The central charge is that business schools are
neglecting one of the most important and critical
aspects of business education. Many scholars and
public figures contend that while ethical education is
given lip service at universities, business schools do a
poor job of sensitizing the students to the important
role that ethical considerations should play in for-
mulating business strategies and carrying them out.
As the debacles at Enron, WorldCom, Arthur
Andersen, Tyco, to mention just a few, demonstrate,
teaching future managers that ethical behavior and
decision-making is central to our financial and
economic system and even our survival as a society,
is paramount.
Representing the very critical perspective of
business schools, Etzioni (2002) stated, ‘‘A recent
Aspen Institute study of about 2000 graduates of the
top 13 business schools found that B-school educa-
tion not only fails to improve the moral character of
the students, it actually weakens it .......Congress
should also haul the deans of the leading B-schools
into a hearing to tell the public how ethics has been
taught at their schools – and what they now plan to
do differently’’ (p. 304). Putting it bluntly, Weisul
and Merritt (2002) state that ‘‘We have to get young
people to stop and think about ethics and the deci-
sions they are making, otherwise, today’s students
may be tomorrow’s criminals’’ (p. 8).
Our study finds that both male and female
undergraduate students through freshmen and senior
classes as well as those working professionals enrolled
in the MBA program, who received ethics instruc-
tion in the classroom, believed that a positive rela-
tionship should exist between ethical behavior and
positive business outcomes. We conclude that both
exposure to ethical issues in the curriculum and
stand-alone courses devoted to business ethics are
366 Harsh K. Luthar and Ranjan Karri
crucial in business education, if we expect students
to be aware of all the critical aspects of social
responsibility and consequences of unethical conduct
for society. The managers of the future are receiving
education in the present. It is a matter of grave
concern that many students do not see the connec-
tion between acting ethically and business outcomes
such as profits, sales growth, etc. Strong exposure to
examining and understanding ethical issues in busi-
ness is called for to ensure that future managers
understand the importance of ethical conduct and its
long-term impact on performance of their organi-
zations as well as society at large.
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Management Department,
Bryant University,
1150 Douglas Pike, Smithfield, RI 02917, U.S.A.
E-mails: hluthar@bryant.edu; rkarri@bryant.edu