Assessment of Ethical Performance of Organization Members: A Conceptual Framework

Author(s): Robert D. Gatewood and Archie B. Carroll

Source: The Academy of Management Review, Vol. 16, No. 4 (Oct., 1991), pp. 667-690
Published by: Academy of Management
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? Academy of Management Review

1991, Vol. 16, No. 4, 667-690.

ASSESSMENTOF ETHICALPERFORMANCEOF
ORGANIZATIONMEMBERS:A
CONCEPTUALFRAMEWORK
ROBERTD. GATEWOOD
University of Georgia
ARCHIEB. CARROLL
University of Georgia
This article describes a conceptual frameworkthat facilitates the assessment of the ethical performance of organization members. Based
upon measurement principles applied to general work performance
assessment, this framework is comprised of three components: the
major stakeholders of the organization, the categorizing of organization members into individual or group units for accountability, and
the division of performance into behaviors or results. Ethical standards can be formulated for combinations of these three components
and expressed in terms of existing laws, or organizational or professional standards. The importance of the frameworkfor business ethics research and theory development is discussed.

The ethics of organization members has been the subject of considerable research over the past two decades as both organizational practitioners and the academic community have embraced ethical behavior as a
legitimate business goal. Although this research has addressed many topics, it has been hampered by the absence of an accepted approach for
directly assessing the ethical behavior of organization members. Undoubtedly this deficiency is at least partly attributable to the complexity and
difficulty of measuring a construct that has not yet been acceptably defined.
The purpose of this article is to take the first steps toward developing an
approach to assessing ethical performance by proposing a framework that
defines and organizes the important variables of such an assessment. First,
some of the previous research in business ethics, which has measured
variables thought to be related to ethical performance, will be considered.
Second, some of the central principles of the measurement of general work
performance are examined. The former provides an understanding of
where ethics research has been in terms of attempts to measure ethical
performance. The latter provides necessary guidelines for assessing ethical
performance. Third, a conceptual framework is presented, and its components are discussed. Finally, the implications that this framework has for
future business ethics research and theory development are discussed.
667

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RESEARCHRELATEDTO ASSESSINGBUSINESS
ETHICALPERFORMANCE
The challenge in conducting a literature review on ethical performance
is that researchers have not looked at performance directly, but rather they
have examined such related variables as feelings, opinions, perceptions,
orientations, or values held by organization members. It is as though the
difficulty and complexity of assessing ethical performance has caused researchers to solicit organization members' opinions of issues related to ethical performance rather than directly examining behaviors or results. Consequently, the brief review presented here examines the approaches that
have been used in assessing variables thought to be surrogate indicators of
ethical performance and focuses on the four data-gathering methods found
most frequently in the literature: self-report questionnaires, hypothetical
ethical dilemmas or vignettes, the interview, and recording of actual illegal
behavior.
The first and oldest approach has been the use of self-report questionnaires, or surveys, that measure how managers or other organizational
members feel about various ethical issues in business. For example, a 1987
study by Fleming identified six of the most-referenced articles in business
ethics as of that date. Only three of these reported actual data, all of which
were survey data gathered from businesspeople. These three studies assessed ethical performance by asking respondents to choose from among
alternative answers the ones that reflected their own viewpoints or opinions. The earliest of these three studies was the now-classic 1961 Baumhart
investigation, in which he surveyed executives who read the Harvard Business Review to determine their opinions on the current state of business
ethics and other issues. The second of the three was the 1977 replication of
Baumhart's study that was conducted, using the same methodology, by
Brenner and Molander. The third empirically based article identified in
Fleming's study was the 1975 survey by Carroll, which sought to determine
the extent to which managers at various organizational levels (top, middle,
and lower management) perceived pressures to go along with their superiors' expectations of them, even though these managers had to compromise their personal standards to do so. In each of these studies the primary
approach was the use of questions that asked the respondents to choose
from among alternative responses the one that best represented how they
felt about an issue.
Four other major studies employed self-report data and merit mention
here. An investigation by England (1967) into the personal value systems of
over 1,000 managers represented the most significant attempt to that date to
profile the values that managers deemed important. England's Personal
Values Questionnaire employed a scaling technique for data-gathering
purposes (1967: 56-58). Aldag and Jackson (1977) employed a Social Attitudes Questionnaire, which also utilized a scaling technique to gather viewpoints on the trade-offs between ethical and economic issues.

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Perhaps the most extensive attempt to employ the self-report survey

methodology was the broad-based study by Posner and Schmidt (1984).
These researchers used a ranking procedure on some questions and a
scaling technique on others. Topics included the respondents' opinions on
such questions as priorities among organizational stakeholders, perceived
pressures on managers to compromise their personal principles, and influences on unethical behavior. The final use of the self-report questionnaire
referenced here is that of Victor and Cullen (1988). They argued that the
organization's ethical climate helps to determine how employees at all levels make ethical decisions. These researchers sought to assess ethical work
climates by asking respondents to indicate on Likert-type scales how accurately they perceived that items described the ethical characteristics of their
work climate. The ethical characteristics of organizations examined included law and code, caring, instrumentalism, independence, and rules.
The second major approach to assessing ethics found in the literature
involves presenting respondents with hypothetical ethical dilemmas and
asking them how they felt about or might react to alternative courses of
action (Brenner & Molander, 1977; Clark, 1966; Posner & Schmidt, 1984).
Some of the previously reported studies used this technique in part. This
general approach has been taken one step further through the use of vignettes. Vignettes are short, hypothetical cases that enable the researcher
to obtain some measure of the difference between espoused ethics and
likely ethical behavior (Cavanagh & Fritzsche, 1985). One of the best examples of the use of vignettes is the research by Fritzsche and Becker (1984),
who provided respondents with detailed vignettes that described decision
alternatives for potential ethical dilemmas. The major limitation of this
study, of course, is that the data represented the actions the respondent
stated would be taken rather than actual actions or behaviors; therefore,
this study represented only a modest improvement over the self-report studies, which gathered opinions, feelings, or attitudes.
The interview approach is the third methodology for data gathering
that has been used in business ethics research. Some of the classic work of
Kohlberg (1981) employed the creation of hypothetical moral dilemma scenarios that were then used as the basis for interviews used to probe and
assess the respondent's moral reasoning. Kohlberg's research suggested six
universal stages through which moral reasoning develops among individuals (Kohlberg, 1981). Another appropriate example of the interview approach is illustrated by the work of Derry (1989). Her technique was the
open-ended and semistructured interview in which participants presented
actual moral conflicts faced at work and described the conflict, how they
evaluated what should be done, and how the conflict was resolved. The
interviews were tape-recorded, transcribed, and coded for subsequent content analysis. Derry's approach was similar to that developed by Gilligan,
Langdale, Lyons, and Murphy (1982) in their study of different types of moral
reasoning. A variation of this interviewing technique was used by Toffler
(1986), as she sought to chronicle what executives thought their ethical de-

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cision making was like as revealed in a series of candid, in-depth interviews. The advantage of this approach is that it side-steps the use of hypothetical vignettes in favor of a self-described, actual ethical dilemma perceived by the respondent. The limitations are many of the same found in
vignette research plus the possibility of selective memories and selfjustifications of the respondents (Derry, 1989: 857).
One final approach to assessing ethical performance is the use of corporate crime or illegal corporate behavior. Using attempts to examine specific illegal acts as a measure of ethics is appealing because specific laws
have been broken and, thus, the definition of right and wrong is simplified.
Clinard and Yeager (1980) and Cochran and Nigh (1987) conducted studies
that are representative of this general line of inquiry. The drawback to this
approach is that corporate crime data, to the extent they are available, are
aggregated for corporations and are not easily identified to specific persons
within the organization. Another problem is that only illegal behavior is
taken into account and, thus, an entire range of ethical behavior and questionable practices may be overlooked.
In the next section concepts that have been identified as critical to the
measurement of work performance in general and, therefore, that are also
relevant for measuring ethical performance specifically are discussed.

THEMEASUREMENT
OF PERFORMANCE
Much has been written describing the strengths and weaknesses of
various techniques of performance measurement (e.g., behavioral rating
scales, management by objectives, the mixed standards scale, and others).
Such work is not of primary importance to this article. Instead, writings that
address the more basic issues, the nature of who and what should be
measured and the general strategies for developing measurement techniques, are reviewed. Logically, these considerations must form the basis
for the development of a conceptual framework for assessing ethical performance in organizations.
Hall (1983) explicitly pointed out the importance of performance evaluation of all employees in an organization when he discussed the impact of
the performance of individuals from various levels of an organization on an
organization's structure, style, and process. Specifically, he stated that the
performance of the top-level individuals can influence the goals and structure of the organization. The performance of bottom-level individuals affects
the organization's culture and the delivery and distribution of rewards. Middle-level individuals, to a large extent, control the implementation of top
management's policies and systems. Therefore, these individuals have
more power to block or facilitate change in the organization than either topor bottom-level individuals. For this article, the importance of Hall's work is
the related concept that measurement of ethical performance of all individuals in an organization is crucial because each strata has a distinct effect on
the overall ethical performance of the organization. Some previous work in
ethics has primarily focused upon managers.

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Smith discussed the necessity of an adequately developed criterion,

which she defined as "a standard or rule by which a judgment can be
made" (1977: 745). There are three dimensions that are critical in specifying
a criterion: the time span to be covered, the specificity desired, and the
closeness of organizational goals to be approached. Concerning time span,
a criterion can be obtained from immediately after actual on-the-job behavior has occurred through a long period afterward. Too often mere convenience, rather than relevance to performance, dictates the measure to be
used and the time span chosen. Regardless of the time span, criteria can
differ in specificity because they may refer to descriptions of small units of
performance, global estimates of performance, or anything in between. At
one extreme is a rater's check as to whether a certain behavior has been
observed. On the other extreme is the combining of multiple results (e.g.,
quality, quantity, timeliness), reflecting various aspects of performance, into
a composite measure. About the third dimension, Smith stated, "Most important in classifying criteria is the dimension that concerns the closeness of
the measure to organizational and societal goals. Criteria range from the
description of actual behavior to evaluation Qf results to estimates of the
effects upon the organization and society" (1977: 750).
Smith also discussed other important characteristics of criteria: reliability (consistency/stability over time) and practicality (availability, plausibility,
and acceptability to those who wish to use the criteria for decisions). Gatewood and Feild (1990) added controllability to this list. That is, it is important
to evaluate an individual's performance on criteria that he or she can directly influence. Many criteria, ranging from grievances filed by subordinates to a unit's profitability, are greatly affected by exogenous variables.
Such criteria are inadequate measures of the individual's performance.
Of additional importance to this article, Smith pointed out that the establishment of a single criterion to measure performance appears to many
to be a hopeless quest. Success is not unitary for different jobs for the same
person, for different persons for the same job, or for different aspects of the
same job for the same person. The number of criteria measures that should
be used to evaluate performance will vary according to the circumstances
of the job. Related viewpoints are expressed by other writers. Hall (1983),
when discussing measuring and rewarding the performance of individuals,
stated that rewards should be linked to both long-term performance and
performance that focuses on obtaining organizational goals as well as the
more commonly used short-term topics.
Staw (1983) posited several general issues that must be addressed in
performance evaluation systems. Among these are the following:
1. The measurement system used at each level and section of an organization may
need to be different.
2. The use of individual versus collective (group) evaluation may depend on the
tasks' interdependency and the corporate culture.
3. The use of procedural (behavioral) measures or outcome (results) variables depends on the confidence one has in a given theory of performance or effective-

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ness. It is easier to rely on procedural measures when there is a known technology

and when certainty in the process is high.
4. Once an organization's philosophy or market strategy is formalized, it provides a
set of constraints and assumptions on which more specific theories of performance
and effectiveness can be based.

From these writings, the following principles emerge for the measurement of ethics in organizations:
1. The measurement system should be linked to the philosophy, culture, strategy,
and goals of the organization.
2. Measurement should be applied to all levels of employees in the organization.
3. Multiple measures should be used within jobs and across levels.
4. Different measurement systems may be appropriate for different organizational
units.
5. Measurement may be applied to an individual or a group of workers depending
on the characteristics of the work.
6. Measurement should address both long- and short-term aspects of performance.
7. Measurement should address both behaviors and results.
8. Whatever is being assessed should be under the control of the individual(s) being
evaluated.

These principles provide the basis for the conceptual framework that is
described in the following section.
FRAMEWORKFOR EVALUATIONOF ETHICS
The goal here is to set forth a framework or way of conceptualizing the
evaluation of the ethical performance of employees. In its essence this
framework may be thought of as a categorization scheme for the assessment
of ethical performance. Because such a framework has not been previously
developed, the concentration is placed on essential issues needed to set a
foundation for assessing ethical performance.
The framework consists of three parts that answer the following key
questions: (a) What is being evaluated? (b) What content areas of employees' roles are being evaluated? and (c) What standards are being used to
make ethical evaluations?
What Is Being Evaluated
To identify what is being evaluated, we propose separating conceptually (a) individual worker performance from group performance, (b) behaviors of employees from results achieved by employees, and (c) actions taken
that are in response to mandates of law from those that are discretionary, or
not legally required.
Regarding the first characteristic, individual versus group performance, it is essential in effective evaluation that the decision makers be able
to distinguish between ethical performance for which the individual should
be held accountable from that for which the group should be held accountable. The key issue here is pinpointing accountability. The group referred to
may be a work group, a department, or a larger administrative unit. It is
necessary to identify accountability not only for assessment purposes but

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also for thinking about or designing strategies for improving ethical performance. The next key issue once level of analysis or accountability has been
determined is that of evaluating employee behaviors versus results. This is
a process versus outcomes dichotomy discussed previously. At this stage in
the evaluation scheme the researcher must identify whether it is the actions
(behaviors) taken by the employee that are being assessed for ethical performance or the results being achieved by him or her. Whether employee
behaviors or results are used will be principally determined by the characteristics of the work.
The third part of conceptualizing what is being evaluated calls for the
researcher to consider whether the action or result is in response to a legal
mandate. It is helpful to the evaluator to be able to separate performance in
which the employee(s) are engaging in response to law versus action taken
at the volition of the individual(s) or organization. This second category is
referred to as discretionary, to imply that the employee's actions are subject
to some degree of voluntary decision making, rather than in response to a
legal mandate. Although both the legal and the discretionary components
comprise ethical performance, there are two major purposes for this distinction. First, it allows the explicit specification of all behaviors and results
necessary to exhibit ethical performance that complies with existing laws.
Second, it allows for ethical standards to be systematically stated for performance not addressed by laws or for which criteria higher than legal
statements are desired.

Content Areas of Employees' Roles

The second major part in the framework development is to think in
terms of the question, "What content areas of employees' roles are being
evaluated?" This part of the classification scheme is based on the stakeholder concept. An expansion of Freeman's (1984) definition of a stakeholder
is useful: any individual or group who can affect or is affected by the actions, decisions, policies, practices, or goals of an organization. Major, generic stakeholder groups, therefore, would include customers, managers,
nonmanagers, owners, suppliers, competitors, the local community, and
any other group such as government or the media with which the organization has transactions. It should be noted that managers and nonmanagers are considered as separate stakeholder groups. Throughout the article, however, the term employees is inclusive of both groups.
These stakeholder groups present a useful way of thinking about the
important contacts or transactions that define employees' roles. It should be
emphasized that the nature of the job tasks of the employee's position will
dictate which stakeholder groups are interacted with by the employee. For
example, at the extremes, top-echelon managers may interact with all major stakeholder groups, whereas an operational employee's contacts may
be restricted to only other employees or, through product or service quality
or safety, to customers. In all cases, however, the stakeholder groups with

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which the various employees interact will lend definition to this phase of the
framework.
Figure 1 illustrates the framework developed to this point. It depicts the
major conceptual distinctions that have been made in this discussion: individual versus group performance, behavior versus results, mandated versus discretionary actions, and interactions with stakeholder groups.

Principles for Setting Ethical Standards

The third part in the framework addresses the question, "What standards are being used to make ethical judgments?" The process of ethical
decision making requires that behaviors or results be assessed against standards or norms of acceptability. The most significant problem in this comparison process is the decision as to what or whose standards will be used
in this comparison. To be sure, standards of moral behavior emanate from
many sources: the law, family, friends, one's religious faith, one's employer,
the community, and one's profession, just to mention a few.
To make judgments about employees' ethical performance, however,
necessitates more specificity than just listing the sources of ethics. A number
of different approaches to making ethical judgments have been set forth in
the literature. Cadbury (1987), for example, argued that a person needs to
understand his or her own value system, potential conflicts of interest that
might be encountered, and the social consequences of decisions or actions.
Nash (1981) proposed a list of 12 questions that, when answered, should
help an individual assess his or her decisions. These 12 questions address
such issues as problem definition, the other person's perspective on the
issue, the employee's motivation, who the decision could hurt, and so on.
Finally, Velasquez, Cavanaugh, and Moberg (1983) presented a schematic
for ethical decision making that focuses on whether an action or decision
meets three ethical criteria: utility, rights, and justice.
Each of these approaches is interesting and useful for a variety of conFIGURE 1

A Framework for Evaluating Corporate Employees' Ethics

Individual Performance
Behavior

Results

Group Performance
Behavior

Results

Legally
Legally
Legally
Legally
Man- Discre- Man- Discre- Man- Discre- Man- Discredated tionary dated tionary dated tionary dated tionary
Owners
Managers
Stakeholder Nonmanagers
Groups
Customers
Community
Other
Stakeholders

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texts. However, for the purposes of this article standards are needed that
can be operationally applied. Therefore, it is proposed that these standards
be captured by the following questions:
1. Does the behavior or result achieved comply with all applicable laws, regulations,
or government codes?
2. Does the behavior or result achieved comply with organizational standards of
ethical behavior?
3. Does the behavior or result achieved comply with professional standards of ethical behavior?

The first standard corresponds with the legally mandated component of

Figure 1, and the second and third standards correspond to the discretionary component of this same figure. These three levels of standards capture
the essential codified norms of acceptable behavior as they are manifested
in (a) society's codified ethics-law,
(b) the organization's belief system, and
that
have
been promulgated by industry assocodes
of
behaviors
(c)
may
ciations or professional associations. As such, they provide the evaluator
with a useful "screen" for sifting out behaviors or results that are deemed
unethical according to the set of standards employed.
The use of organizational or professional standards, however, must
embody a basis for normative judgment that transcends organizational or
professional cultures. Philosophers and ethicists, over the centuries, have
debated criteria and theories for ethical decision making, and three stand
out as particularly prominent and useful: rights, justice, and utilitarianism
(DeGeorge, 1990; Velasquez, 1982). These three are proposed as the normative principles that should be used to anchor organizational and professional ethical standard setting. Each of the principles utilizes distinctive
moral concepts, and each one emphasizes aspects of behavior or results
that are neglected or not emphasized by the others (Velasquez, 1982).
Rights theories, such as those proposed by Kant (personal rights) and
Locke (property rights), focus on the entitlements of individual persons.
Rights express the requirements of ethics from the standpoint of the individual (Cavanagh, 1984) and essentially hold that ethical decisions must protect the individual's legal and moral entitlements. Legal rights are rooted in
law and, accordingly, are protected. Moral rights, according to DeGeorge,
are important, normative, justifiable claims or entitlements and are rooted
in the nature of the members of the moral community. In just societies, legal
and moral rights overlap considerably (DeGeorge, 1990: 81).
Justice theories have an older tradition than rights theories, and these
can be traced to Plato and Aristotle in the fifth century B.C. The concept of
justice requires that all persons be guided by fairness, equity, and impartiality. A more recent contribution to this body of thought has been made by
Rawls (1971), who suggested that justice requires that people look at rules
and laws as if they did not know what role they were to play in a society that
would be governed by them.
Utilitarianism as an ethical theory holds that an action or decision is
right if it produces, or tends to produce, the greatest good for the greatest

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number affected by the action; otherwise, the decision or action is wrong

(DeGeorge, 1990). Utilitarianism may be traced to Adam Smith and David
Ricardo. Jeremy Bentham (1789/1970) and John Stuart Mill (1863/1957) more
precisely formulated the theory. Utilitarianism employs a teleological approach to ethics and asserts that behavior or actions should be evaluated in
terms of their consequences. That is, the behavior that produces the greatest
net gain for all affected groups is considered moral.
Each of the theories presented-rights,
justice, and utilitarianism -has
its own rich history, nuances and adherents. Each also has its strengths and
weaknesses. Taken together as a set of ethical principles, however, moral
philosophers have argued that each addresses an ethical aspect of behavior that should not be overlooked. There is no standard answer to the question of how one should reconcile the different views if they should compete
with one another in a decision situation. DeGeorge (1990: 72-74) discussed
what course a person should take when confronted with a "clash of moral
rules," but space does not permit that complex discussion here. Velasquez,
Cavanagh, and Moberg (1983) presented a schematic for ethical decision
making that employs the combined criteria of utility, rights, and justice.
They essentially argued that if an action meets all three criteria, it is deemed
ethical; if the action fails all three criteria, it is deemed not ethical; if the
action fails to meet one or two criteria, a person must consider whether any
"overwhelming factors" would tilt the decision one way or the other. In
addition, Carroll (1989: 128) presented a process of ethical decision making
that employs an "ethics screen," which is comprised of ethical principles
(utilitarianism, rights, and justice), ethical tests, and standards or norms
(personal, organizational, societal).
A special challenge arises when the decision maker attempts to apply
these ethical principles in the face of cross-stakeholder interactions. This
would be a situation wherein organizational responsiveness to one set of
stakeholders (e.g., owners) might have ethical implications for another set
of stakeholders (e.g., employees). Ethicists have no sure way of reconciling
these competing demands. Some general guidelines were provided by
Barry (1986: 67), however, when he proposed some decision making rules
regarding cases of conflicts and mixed effects:
1. When two or more obligations conflict, choose the more important one.
2. When two or more ideals conflict, or when ideals conflict with obligations, choose
the action that honors the higher ideal.
3. When the effects are mixed, choose the action that produces the greater good or
the lesser harm.

These guidelines, when used in conjunction with the ethical principles

discussed previously, provide the decision maker with guidance in dealing
with cross-stakeholder conflicts and competition. This approach provides
some assurance that principled decision making with an aim toward ethical
due process takes precedence over a haphazard or thoughtless consideration of the trade-offs involved.
Thus, it is posited that the ethical standards to be einployed include

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those manifested in law (to include regulations or government codes), organizational standards, and professional standards. It is unrealistic, however, to think of organizational or professional standards that have no normative anchor which transcends the local culture. This is because without
such an anchor, any standards derived by an organization, no matter how
ill-formed, would by definition be acceptable. Therefore, the rich history
and tradition of moral philosophy should be employed to guide the setting
of standards. In particular, norms emanating from a consideration of rights,
justice, and utilitarianism should be brought to bear on the standard-setting
process. Though this will not yield a simple process, it will produce standards for making ethical judgments, which are rooted in principled decision
making and which can be defended when both interorganizational and
intraorganizational research is pursued.

Examples of Ethical Standards

It should be recognized that, in most instances, standards would not be
developed for each cell in our framework for every topic of ethical performance. For the component of the framework, behaviors versus results, the
two categories are, for all practical purposes, mutually exclusive in use.
That is, standards would normally be set for either behaviors or results, but
not for both. In the measurement of work performance in general, a common practice is that work behaviors are assessed in those cases in which (a)
there is one, or a small number of, behavior(s) that are appropriate for
successful completion of the task or (b) the results of the work activity may
not be measurable for a long period of time. In other situations, it is common
to assess results.
Similarly, the applicability of a second component of the model, individual versus group, is dictated by the nature of the work activity of interest.
That is, it is often impossible to separate and assess either the actions or the
results of one individual from those of others in the work group. In these
cases, the setting of standards at the group level, but not the individual
level, would be appropriate for assessing ethical performance. However, in
cases in which the behaviors or results of the individual are distinct from
others, it is possible to set standards at the individual level.
For these reasons, it is uncommon for standards to be derived for each
cell of the framework for a given topic. For example, standards developed
for the stakeholder group, employees, regarding their design and conduct
of national advertisement campaigns would, most likely, be written for behaviors of group members rather than for results obtained by individuals.
This is because the nature of the work involves group interaction and the
results (e.g., customer perceptions of advertising are difficult to measure).
On the other hand, sexual harassment is an example of a topic for which
standards could be developed at both the individual and the group levels,
and both behaviors and results could be assessed.
In the following paragraphs examples are given of types of standards
that may be developed by using this conceptual framework. First, consider

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a standard that would address the issue of bribery. A standard for bribery
of a potential customer could be depicted in an excerpt of the framework
presented earlier in Figure 1. For this discussion this standard is categorized
as an individual behavior that is legally mandated by a specific law, the
Foreign Corrupt Practices Act. Figure 2 depicts this standard placed within
the context of the applicable sections of the Figure 1 framework.
In this case adherence to the Foreign Corrupt Practices Act, which
prohibits bribery for the purpose of getting business, is seen as the standard
of behavior that would be used to judge the ethics of the individual organization member under consideration.
Our second example illustrates a standard affecting a different stakeHere the issue or behavior under consideration
holder group-employees.
is sexual harassment. In this case, a legally mandated standard and a
corporate standard are presented. This example is also an illustration of an
individual behavior. Figure 3 presents this example, along with an indication of the applicable law and corporate policy statement.
A third example illustrates a corporate standard that can be applied to
an employee's results rather than to behaviors. Here the stakeholder group
is employees and the result under consideration is the achievement of a
workplace where minorities are not only treated fairly but also are fully
integrated into supervisory positions. For the division manager whose performance is being evaluated in this example, the achievement of specified
results established in corporate goals is the frame of reference. Figure 4
illustrates excerpts from the evaluation framework that depicts this standard.
The final example is one in which group standards concerning results
are determined in reference to the community stakeholder group. Both legally mandated and discretionary standards are set. The general issue is
water pollution. The specific issue is effluent limits for surface water contamination. In this case a specific manufacturing plant of a multidivisional
corporation is the group under consideration. The water pollution flowing
from this plant is a function of the decisions and actions of a number of
personnel within the plant, and, therefore, corporate headquarters decided
to use the group (entire plant) as the unit of evaluation. The legally mandated standards are those set by EPA Standard 101: Effluent Limits. The
discretionary standards are those set by the National Association of Chemical Plant Managers (NACPM), a professional association, which has set

FIGURE2
An Example of a Legal Standard for Individual Ethical Behavior
Individual Performance
Behavior
Legally Mandated
Stakeholder Group

Customers

Standard for bribery: Foreign

Corrupt Practices Act

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FIGURE 3
Examples of a Legal Standard and a Corporate Policy Standard for
Individual Ethical Behavior
Individual Performance
Behavior

Employees

Legally
Mandated

Discretionary

Sexual harassment is
prohibited under
Title VII of the Civil
Rights Act.

Corporate policy: Not only are

forms of sexual harassment (as
defined in Title VII)prohibited, but
it is also company policy that
employees have a right to work in
an environment completely free of
sexual innuendos, jokes, or
references. Employees are to be
regarded as individuals, not as
members of a gender group who
have common characteristics.

Stakeholder
Group

higher standards for this industry category. These standards are stated in
NACPM Guideline 44G: Effluent Goals for Member Corporations. The assessment of the group's performance in this example would be a product of
comparing its results to both federal guidelines as well as those recommended by the professional association.
Performance Measurement Principles Manifested in the Framework
In this section the proposed assessment framework is elaborated on
through a discussion of how it manifests the principles of performance measurement identified previously. The first principle is that the measurement
system should be linked to the philosophy, culture, strategy, and goals of
the organization. It should be noted that when applied to the measurement
of ethical performance, the appropriate statement of this principle is that the
measurement system should be linked to the ethical philosophy, culture,
strategy, and goals of the organization. These ethical considerations
FIGURE 4
An Example of a Corporate Standard for Individual Ethical Results
Individual Performance
Results
Discretionary
Stakeholder Group

Employees

Corporate goal for an integrated supervisory level

of management: By the end of the evaluation
period under consideration, each manager is to
have achieved at least a 12% representation rate
of minorities in entry-level supervisory positions
reporting to him/her.

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Academy of Management Review

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should, in turn, be linked to the overall philosophy, culture, strategy, and

goals of the firm. Logically, an assessment system of ethical performance
should be directly linked to the former and indirectly linked to the latter.
The organization's ethical concepts can be directly represented in this
framework. This representation is a function of the stakeholder groups that
are specified and the standards that are designated. The stakeholder
groups clearly signify those for whom the organization chooses to be responsible. The standards indicate the level of responsibility. Legal mandates usually indicate minimum levels, whereas discretionary standards
usually indicate higher levels of responsibility. The resulting statement of
the parties and the extent of ethical responsibility is a clear representation
of the explicit ethical culture, philosophy, and goals of the organization.
The second principle is that measurement should be applied to all
levels of the organization. As illustrated previously in Figure 1, the framework can be tailored to each employee or group of employees through the
identification of stakeholders and the use of the behavior-results, legally
and individual-group dichotomies. These conmandated-discretionary,
structs can be applied to all members of the organization, with differences
among members being reflected in the particular pattern of cells that have
specified standards.
The third principle, multiple measures within jobs and across levels, is
manifested through the use of the three factors used to define the framework. Each cell of the framework could employ different measurements,
depending on the combination of what is evaluated, the content areas specified, and the standards used. A single overall measure would be unlikely
to capture the appropriate specificity. Similarly, the fourth principle, that
different measurement systems may be appropriate for different units, can
be easily demonstrated. If two units differ on any of the three factors in the
conceptual framework, the measurement systems applied to them would
necessarily differ. For example, if the difference was in the use of behaviors
versus results, entirely different data would be gathered to make an evaluation of ethical performance. Individuals or organizational units would
only use the same measurement systems if they were similar in all factors of
the framework.
The fifth and seventh principles are directly stated as part of the framework: the distinction between individual and group performance and the
distinction between behaviors and results. By direct implication the sixth
principle of measurement of both short- and long-term aspects of performance can be captured by using these two distinctions. The most direct
example is the use of behaviors (short-term) versus results (long-term). Results also can be divided to capture various frames of longitudinal development. Lastly, the eighth principle, that of the assessment of performance
controlled by the individual(s), is operationalized in the individual versus
group and behavior versus results dichotomies. The proper allocation of
these factors allows a precise specification of responsibilities that are directly controlled by one individual or a group of employees.

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IMPLICATIONS
FOR RESEARCH
The most important characteristic of this framework is that it is a comprehensive specification and arrangement of those variables that are fundamental to ethical performance in organizations. Because of this characteristic, the framework has two uses for researchers of business ethics. Both
of these uses will be described in detail in this section.
The first use is an instrument for theory development. One critical part
of theory development is the examination of the relationships among variables. The framework identifies the variables of stakeholders, ethical standards, unit of accountability (group versus individual), and dimensions of
performance to be measured (behavior versus results). Furthermore, subcategories within pertinent variables are specified (e.g., legally mandated
and discretionary within the variable-ethical
standard), and a general
organization of these variables (Figure 1) is given. The discussion and elaboration of interactions among these variables will contribute to the specification of relationships among constructs of ethical performance and will
assist in model and theory development. One example of how the framework can be used in this way will be discussed.
The second use of this framework is to provide a method of measuring
ethical performance of individuals and groups. Presently, business ethics
research has been hindered by the difficulty in measuring performance in
terms of its ethical value. This framework would enable researchers to scale
ethical behaviors or results as having negative or positive value in comparison with the standards that can be specified in each of the cells of the
proposed matrix. Such measurement is essential to several topics of empirical research in business ethics. This use of the framework will be incorporated into a discussion of research on the development and implementation
of ethical standards into organizations.

Theory Development in Business Ethics

In order to specifically describe the use of this framework in theory
development, this section illustrates how it may be used to complete previous work in ethics theory. One such work is that of Kahn (1990), who discussed activities necessary for the development of an agenda (an organizing framework) for business ethics theory and research. He conducted interviews with 32 business ethics researchers from various academic
disciplines and used this information to generate themes about past and
present research activities. One of Kahn's conclusions is that there are two
classes of concepts that comprise the core of business ethics theory: normative, which focuses on how an individual "ought" to behave, and contextual, which focuses on the situational aspects of ethical behaviors or results.
The next phase of business ethics research and theory development
must bridge these two classes of variables. Kahn described the images that
are essential to this bridging. These images are the analogies that researchers use to describe their work, and they are regarded as the "subtexts and

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Academy of Management Review

October

driving forces of the field's ethical concepts" (1990: 314). These images
present ethics as conversation, history, vision, and community. Collectively, these images serve as a way to link the conduct and content of future
research. They map the interaction of academic research and theory with
normative practice. In order to illustrate the use of the present framework in
theory development, the following paragraphs discuss its use in operationalizing two of Kahn's images.
The image, conversations, emphasizes the importance of dialogues in
creating theory of ethical behavior. An ideal way for ethical behavior to
develop is to start as public, verbal debate between individuals. Such debate requires the two-stage process of, first, self-confrontation and, second,
confrontation of others. Inherent in this is the idea that moral knowledge
arises from the confrontation of diversity of opinion (Srivastva & Barrett,
1988). The conceptual framework specified in this article would require systematic conversations, as standards for each of the cells in the framework
are developed. Within-organization conversations, for example, would be
necessary as ethical standards for behavioral interactions between sales
personnel and customers would be determined. The specifications of the
standards for all appropriate cells of the framework would require conversations among all organizational members. Similarly, the proposed framework also can provide a map for conversations among researchers. Among
the specific research questions that Kahn introduced as being appropriate
for the conversation image and which can be addressed effectively with this
framework are the following:
What are the characteristics of conversations that help people struggle with and
resolve ethical dilemmas?
What types of issues create the need for conversations about ethical issues? (1990:
322)

For both of these questions, the characteristics of the framework (e.g.,

individual versus group, results versus behaviors, types of stakeholders,
and mandatory versus discretionary standards) provide variables that can
be used in research efforts. For example, in reference to the first question,
it may be determined that there are many differences of opinion among
organization members in conversations characterized as being about the
behaviors of individual employees directed toward consumers and which
seek to develop standards other than legal ones. These differences of opinion, in turn, force an examination of the assumptions about human behavior
that are made by the various parties and lead to more commonly understood ethical standards.
The image of ethics as history emphasizes that ethics evolve over time.
It is only possible to understand them by using a longitudinal perspective.
Concurrent snapshots provide only momentary relationships among variables, which may change unexplainably. The study of ethics' relationship to
organizational culture, for example, would require historical data about
both the traditions and the ethical standards of the organization. Some

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relevant research questions that Kahn posed for study using the history
image include
How does the history of conflict and segmentation among certain organization
groups (e.g., labor/management, manufacturing/development) influence ethical and
unethical behavior?
How do organization members translate procedures that are developed in one historical context to issues reflecting changed contexts? (1990: 322)

The proposed conceptual framework could provide the organizing continuity for the collection of relevant data to address these questions. For
example, to examine the first question, it would be appropriate to note the
changes in the frequency of ethical behavior or results in specific cells of the
framework over a period of time. These changes in the frequency of ethical
behavior or results could then be related to data measuring the degree of
conflict between labor and management.
The usefulness of the framework also can be illustrated with the remaining images. To do so, however, is beyond the scope of this article.
Rather, the article's purpose has been to present one way that the variables
behaviors or results, individthat comprise this framework-stakeholders,
be
ual and group, legally mandated and discretionary standards-can
used to systematically expand previous theory development in business ethics.

Research in the Development of Ethics in Organizations

In this section the potential use of the framework for a second purpose,
research into the factors important for the development of ethical standards
in organizations and the socialization of organization members to those
ethical standards, is discussed.
In research on these topics, the framework would serve mainly as a
means to develop criteria or ethical performance measures that are necessary for empirical research. The development of this framework allows for
the specification of standards of ethical behaviors or results for individuals
or groups of employees. These standards would, in turn, permit the development of either within-organization or between-organization measurement systems. In the former, the standards would be the basis against
which the actual behavior or results of organization members can be compared. These actual behaviors or results can then be assessed as either
below, equal to, or above the standards. For between-organization measurement, the standards for each of the cells in the framework would be the
points of comparison. This framework would permit the comparison of statements of ethical standards on common topics or issues by the organizations.
Scaling systems could be developed that measured differences in either the
levels of the standards or the breadth of the standards between organizations. The scores resulting from these methods would be the ethical performance data necessary for empirical analyses. Although there are many
research topics for which this conceptual framework would be useful, four
of these are addressed.
Stakeholders' influence and ethics. According to Freeman's (1984) def-

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inition, the term primary stakeholder generally applies to owners, suppliers, employees, customers, and competitors. Through economic power,
each group has influence on the actions of the organization. Understanding
the impact that various stakeholder groups have on the ethics of the organization is important.
One fundamental research question is the extent to which stakeholder
economic power translates into impact on the development of ethical standards of the organization. The act of mapping relations between stakeholders and the firm (Freeman & Reed, 1983) includes two important assessments of stakeholder influence: (a) how seriously the stakeholder's interests
affect the firm if left unattended and (b) the extent to which the organization
can be affected in either the long or the short run by stakeholder demands
and actions. These assessments are useful for this topic of ethics research.
Basically, data from the mapping process can be related to ethical standards developed for various cells of the framework. One research project
would be to compare the ethical standards of groups of firms that differ in
their assessed profiles of stakeholder influence. For example, one might
suspect that ethical standards would be lower for those firms for which
competitors have a dominant impact relative to other stakeholders than for
those firms for which employee groups are dominant. This prediction is
based on the premise that firms with large competitor impact would be less
likely to endorse behaviors that may increase costs and lessen their positions relative to competitors. Frequently, higher-level ethical standards are
regarded as being of increased short-term cost in their development and
implementation.
Another research topic that could be studied in a similar fashion is the
relationship between the level of conflict among stakeholder groups in their
demands on the organization and the ethical behavior and results of the
organization. It is to be expected that there would be various levels of disagreement among stakeholder groups about the appropriate ethical standards for cells in the framework. The examination of this disagreement in
relationship to both the level of standards that are developed by the organization and the actual ethical behavior or results of individuals and groups
of the organization would be important.
Socialization of ethics. This process is the internalization of organizational ethical standards by the individual employee. The dynamics of this
internalization are of major research importance to the field of business
ethics. Internalization is fundamental to the ethical conduct of organization
members (Wood, 1990). According to McCoy (1985), control systems are an
integral part of employee socialization. One important control system that
he discussed is corporate culture, the embodiment of the values of the organization. Saffold (1988) described two important characteristics of corporate culture when measuring its impact on organizational variables: cultural dispersion (diffusion across the social and personal dimensions of an
organization) and potency (power of culture to influence behavior).
One research question in this topic is, "To what extent are ethical stan-

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dards part of organizational culture?" It seems reasonable to expect that if

culture reflects the values of the organization, then standards for the cells of
this framework are part of that culture. One tentative hypothesis is that
organizations with highly dispersed and highly potent cultures have developed consensus relative to the ethical behaviors or results of individuals and
groups of stakeholders more often than have other types of organizations
(Victor & Cullen, 1988). To examine this hypothesis, one would measure the
dispersion and potency of corporate culture in a sample of organizations.
This conceptual framework could be used to assess the level (mandatory
versus discretionary) and the extent (number of cells with specified standards) of ethical standards in the same sample of organizations. Comparisons could be made among high and low diffusion or high and low potency
organizations on these measures of ethical standards. One would anticipate
that organizations that are high on the cultural measures also would be
high on the ethical measures.
A related and important second research question is the relationship
between value orientations of organizations and their ethical standards.
England (1975) developed a classification scheme for identifying the value
orientations of managers. The pragmatic approach describes those whose
foremost concern is whether an action will advance the company's objectives. The ethical/moral approach concentrates on whether the action is
defensible within a coherent framework of principles. Managers with the
affective approach are mostly concerned with the expected pleasure or
pain of the action. A mixed approach is also possible, which describes
combinations of the previous three value orientations. England (1975) developed survey procedures for measuring these values of managers and
describing either an individual's, or group of managers', value orientation.
Generally, the pragmatic orientation is the most common, and the affective
orientation is the least common.
One obvious expectation of this research topic is that there should be
differences in the ethical standards among managers with different dominant values. For example, it would seem logical that managers characterized by the ethical/moral approach would have more stringent standards
than others. However, this supposition has not been empirically tested, nor
has the nature of differences in ethical standards among managers with
other value orientations been examined. The use of England's procedures
and this framework would allow researchers to gather data about both
values and ethical standards of managers and to examine the relationship
between the two.

Incorporating ethics into performance measurement systems. According to reinforcement theory, one means of increasing the frequency of ethical behavior or results would be to reward such activity when it occurs.
Giving rewards in reinforcement theory, however, assumes that appropriate behaviors can be defined and identified. Otherwise, the reward is sometimes given for inappropriate behavior, and the association that must be
made by the individual between the reward and the desired behavior is

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tenuous; deficiency in forming this association reduces the impact of the

reward in increasing the frequency of the desired behavior. Jansen and Von
Glinow (1985) described this phenomenon in organizations.
In terms of reinforcement for ethical performance, the framework described here would enable organizations to be specific in the standards of
expected ethical behavior or results. In essence, these standards would be
the statements developed for the cells of the framework. These standards
could be incorporated into existing performance measurement systems of
the organization and, thereby, would formalize the review of ethical behavior or results of employees. Rewards could then be linked to the results of
this formalized review. A more nearly complete description of the appropriate features of reward systems can be found in Lawler and Rhode (1978).
One important research question regarding this topic is, "What is the
effect of the use of rewards on the frequency of ethical behavior or results of
employees?" This question can be studied in different ways. For one, organizations similar in terms of industry and size could be compared on the
basis of how adequately rewards are linked to ethical actions or results of
employees based on the previously mentioned guidelines of Lawler and
Rhode (1978). The hypothesis would be that a positive relationship would be
found between the adequacy of the reward system and the level of ethical
performance of the employees. Because of the expected small number of
organizations that actually have reward and measurement systems linked
to ethics, a second, more feasible approach, might be to collect data in a
sample of organizations before and after the implementation of this conceptual framework and an accompanying reward system. The hypothesis
would be that an increase in ethical performance would occur after the
intervention. A third approach would be to examine the effect of monetary
versus nonmonetary rewards on the frequency of ethical performance.
Such information would be important in the design of reinforcement systems.

Ethical performance and economic performance. Most of the research

which has focused on the relationship between socially beneficial organization performance and economic performance has been conducted under
the rubric of corporate social performance (CSP). In some instances the term
CSP has been used in a manner consistent with ethical performance. In
other instances, ethical performance more nearly has been seen as a subset
of CSP. In either case, previous research has yielded inconsistent findings
concerning the relationship between corporate social performance or ethical performance and measures of the organization's financial performance
(Aupperle, Carroll, & Hatfield, 1985; McGuire, Sundgren, & Schneeweis,
1988). This is due in part to the variability in the measures of social or ethical
performance that have been used. For one early measure, researchers
used expert evaluation of corporate policies. For example, Sturdivant and
Ginter (1977) used an index from the Council of Concerned Businessmen.
Moskowitz (1972, 1975) used two rankings from Business and Society. The
validity of such evaluations depends to a large extent on the knowledge of

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the individuals doing the evaluation and the agreement among evaluators
of what characteristics are being judged. For a second type of measure,
researchers used content analysis of corporate annual reports or other corporate documents (Abbott & Monsen, 1979; Preston, 1978). However, the
relationship between such public statements and actual corporate actions is
unknown. For a third measure, researchers used performance in controlling pollution as an indicant (e.g., The Council of Concerned Businessmen
Pollution Performance Index [Spicer, 1978]). However, pollution control is
only one segment of total ethical performance, and it applies to only a
limited number of industries. Other studies have nicely summarized the
kinds of measurements that have been used to operationalize corporate
social and economic performance (Aupperle et al., 1985; Cochran & Wood,
1984; Ullmann, 1985).
The use of the framework presented in this article would provide a more
direct measure of ethical performance than any of the previously mentioned
methods. Therefore, it is expected that there would be more consistency in
the demonstrated relationships between ethics and performance across
studies. The most feasible research strategy would focus on the organization
as the unit of analysis rather than individual or groups within the organization. For a sample of firms in the same industry, the standards of each of
the firms for cells of the conceptual framework could be gathered. These
data would enable researchers to rank the firms on the basis of level of
specified ethical performance standards. This ranking could be related to
the financial performance of the firms to estimate the relationship between
these ethical standards and economic performance.

DISCUSSIONAND IMPLICATIONS
The ethical performance of individuals and groups within business organizations has become an increasingly important topic in management
research. Though this body of research has addressed several subjects,
including managers' opinions about the general level of ethical performance in business, organizational factors related to the level of ethical
values expressed by employees, and factors affecting the alternative chosen by individuals when faced with ethical dilemmas, almost no research
has directly studied the actual ethical performance of organizational members and the variables related to this performance.
This article addresses this deficiency in research by describing a framework for assessing ethical performance. This framework is composed of
three organizing components: an identification of the major stakeholders of
the organization, the categorizing of organization members into individual
or group units for accountability, and the division of performance into behaviors or results. These three components are crossed in a three-variable
framework in which the cells represent combinations of the interactions
among these three components. Ethical standards can then be formulated
for each cell in terms of existing laws, or organizational or professional

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codes of conduct established through the application of normative principles such as rights, justice, and utilitarianism. These standards become,
then, the criteria for ethical performance of organization members. Assessment of ethical performance becomes the result of evaluating the behaviors
or results of members in comparison to the expressed, appropriate ethical
standards.
Both the process of developing this framework within organizations and
the resulting measurement of ethical performance of organizational members should make important contributions to the body of research in business ethics. The process of development forces the interactions that Kahn
(1990) described as critical for the specification of the next stage of theory in
business ethics. The assessment of individuals and groups provides the
quantification of ethical performance and the possibility of conducting empirical research using this measured variable.

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Robert D. Gatewood received his Ph.D. from Purdue University. He is currently serving
as the Interim Chairman of the Department of Management at the University of Georgia. His recent research is in the areas of recruitment, selection, and adjustment to job
loss.
Archie B. Carroll is professor of management and holder of the Robert W. Scherer
Chair of Management and Corporate Public Affairs at the University of Georgia. He
received his D.B.A. degree from the Florida State University. His current research
interests include business ethics and corporate social performance. He is a former
chairperson (1976-1977) of the Social Issues in Management Division of the Academy
of Management.

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