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Business and Society Review 114:1 1– 29

Ambiguous Allure:
GEORGE
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Ethics
REVIEW BERKLEY, ET AL.
Bentley College

The Value–Pragmatics Model


of Ethical Decision Making
GEORGE W. WATSON, ROBYN A. BERKLEY, AND
STEVEN D. PAPAMARCOS

ABSTRACT
Research in organizational ethics emphasizes those disposi-
tional factors that are expected to foster positive ethical
behavior. We seek to contribute to this literature by includ-
ing personal values that are in contention with moral
outcomes. Specifically, we combine the values of hedonism
and power with benevolence and universalism. Our underly-
ing premise of this value–pragmatics model is that nonmoral,
as well as moral, dispositional characteristics simultaneously
influence ethical decision making. We further contribute
to the existing research by investigating how these con-
tending values interact with situational factors, such as
performance rewards and punishments for unethical
conduct. We administer an experiment to subjects (N = 177)
and analyze their decisions regarding the likelihood they
would act unethically. Results indicate that both morally
relevant and nonmoral variables have direct effects on these
decisions, and that nonmoral as well as moral values interact
with situational factors to significantly influence decisions.
Implications for practice and research are discussed.

George W. Watson is an associate professor at the Department of Management and Marketing,


Southern Illinois University Edwardsville, Edwardsville, Illinois, USA.
Robyn A. Berkley is an assistant professor at the School of Business, Department of Management
and Marketing, Southern Illinois University Edwardsville, Edwardsville, Illinois, USA.
Steven D. Papamarcos is the Dean at Tobin College of Business, Saint John’s University, New York.

© 2009 Center for Business Ethics at Bentley University. Published by Wiley Periodicals, Inc.,
350 Main Street, Malden, MA 02148, USA, and 9600 Garsington Road, Oxford OX4 2DQ, UK.
2 BUSINESS AND SOCIETY REVIEW

O
rganizational moral behavior is addressed by a number
of theories. At the center of any theory, however, is the
assumed moral nature of the agent. Yet, as others have
argued: “. . . this problem is so generally neglected that it has been
possible to make off with its very name almost without being
noticed and, evidently, without evoking any widespread feeling of
loss” (Frankfurt 1971:6). Our goal in the present research is to
contribute to the specification of this moral nature by examining
the influence of negative dispositional characteristics in the person–
situation interaction model simultaneously with positive influences.
This is the core of the value–pragmatics approach.
Organizational ethicists have historically evaluated the person’s
ability to reason out moral problems in ways that result in accept-
able justifications for a choice of action (Kohlberg 1984; Piaget 1965;
Rest et al. 1999). Other theories claim that humans develop an
ethical ideology that is predictive of moral judgment and they
examine these ideological inclinations along the consequentialist
and formalist dimensions (Forsyth 1980; Forsyth and Berger 1982;
Forsyth and Nye 1990). Still others see moral reasoning as a
cognitive predisposition (Brady and Wheeler 1996) more likely to be
autonomously generated than an acquired ideology.
Other organizational moral behaviorists, however, see limitations
in the dispositional and rational approaches described previously,
because they are individualistic and do not account for the differ-
ences in contextual circumstances (Ashkanasy et al. 2006; But-
terfield et al. 2000; Church et al. 2005; Trevino 1986; Trevino and
Youngblood 1990). One approach in bridging this gap is the
person–situation interaction model (Trevino 1986). This model
holds as its primary hypothesis that: “. . . ethical decision making
in organizations is explained by the interaction of the individual
and the situational components [such that] . . . individual and
situational variables interact with the cognitive component to
determine how an individual is likely to behave in response to an
ethical dilemma” (Trevino 1986: p. 602).
The problem of competing moral motivations, although broadly
recognized in ethical dilemmas as conflicts of interest, is rarely
explicitly analyzed in models of moral decision making. As organi-
zational ethicists, we tend toward understanding humans as having
the capacity to transcend self-interests that create conflicts of interest.
Empirical evidence, however, demonstrates time and again that we
GEORGE W. WATSON, ROBYN A. BERKLEY, ET AL. 3

are just as likely to indulge our personal interests at the expense


of others (Batson and Thompson 2001; Batson et al. 1999; Batson
et al. 2002).
Consequently, our present goal is to further elaborate upon this
ambiguous aspect of human moral character. We examine charac-
teristics and factors that simultaneously inhibit and encourage moral
conduct. We believe that this, more comprehensive depiction of the
contentious nature of personal motivations will assist us in better
profiling the person who is interacting with contextual contingen-
cies. We begin by reviewing the pertinent introductory material on
the person–situation interaction model and the value–pragmatics
approach. We then pose several testable questions aimed at clarify-
ing the dualities of moral nature. We then test these propositions
and discuss their implications for further research and practice.

VALUES IN THE PERSON–SITUATION INTERACTION


HYPOTHESES

Theories of ethical reasoning in organizational contexts build upon


the Cognitive Moral Development paradigm (Kohlberg 1984; Piaget
1965; Rest et al. 1999). In the principal formulation of this cognitive
model a person is thought to encounter a four-step process of; (1)
becoming aware of a moral issue, (2) making a conscious and delib-
erate judgment about that issue, (3) experiencing moral intention
and motivation, and (4) carrying out morally related action. These
steps are the central cognitive processes of the rational approach to
moral reasoning (Sonenshein 2007). Influential variations on the
rational theme have developed in recent decades. For example, the
person–situation interaction model investigates more explicitly how
various social-structural factors found in the surrounding context
of the dilemma influence moral behavior. Moreover, the issue con-
tingency model has attempted to isolate the effects of factors that
are specific to a particular ethical issue. Importantly for the present
research, the person–situation perspective characterizes the envi-
ronment within which a person is embedded and is expected to
reason and act. This research has been an effort to distinguish
the effects of personal characteristics from those of contextual
characteristics—or separating the apple from the barrel (Zimbardo
2004). The general outcome of this research has been to recognize
4 BUSINESS AND SOCIETY REVIEW

that situations powerfully influence behavior and the moral agent


has few resources with which to resist these forces.
Although the person–situation model has been impactful, it has
not been especially fruitful. In our view, a handful of studies ade-
quately describe the dependent and independent variables as well
as the key moderators in this vein of research (Ashkanasy et al.
2006; Butterfield et al. 2000; Church et al. 2005; Greenberg 2002;
Trevino 1986; Trevino and Youngblood 1990). Table 1 contains a
summarized review of this literature.
Our hypotheses leverage the several themes threading through
the articles identified in Table 1. The first theme is in the role that
the magnitudes and expectancies of reward (and/or losses) play in
explaining the variance in the dependent variables (Ashkanasy
et al. 2006; Church et al. 2005; Trevino and Youngblood 1990). For
example Church et al. (2005) report direct effects for the magnitude
of financial reward for ethical wrongdoing. Trevino and Youngblood
(1990) measured vicarious rewards and punishments and found
some indirect influence for vicarious reward on ethical decision
making. Ashkanasy et al. (2006) measured the expectancy of reward
for unethical behavior and found that cognitive moral development
moderated the effect of reward expectancies on moral decision
making. Clear precedence for incentives and disincentives for
unethical behavior as components of the situation are offered in
these findings. Although we did want to replicate the results of these
studies we felt it was important to include variables for reward
and punishment as factors in the present models.
A second theme is the inclusion of a measure for cognitive moral
development (Ashkanasy et al. 2006; Church et al. 2005; Greenberg
2002; Trevino 1986; Trevino and Youngblood 1990). Although the
same measure is not used across all studies, each measure of
Cognitive Moral Development (CMD) relies on the quality of the
justification for a particular decision to derive a moral reasoning score.
In all empirical cases identified in Table 1, the moral reasoning
score emerged with significant direct effects. Moreover, combined
effects with the just world illusion, and outcomes expectancies
have also been reported (Greenberg 2002). As a result of the long
and convincing argument that moral reasoning influences morally
relevant outcomes generally, and the role for moral reasoning in
the person–situation model in particular, we include CMD as an
additional control variable in the present study (Trevino 1986).
GEORGE W. WATSON, ROBYN A. BERKLEY, ET AL.
TABLE 1 Overview of Exemplar Literature
Study and primary
question Dependent variable Situational factors Dispositional factors Reported results

Butterfield et al. (2000) Moral awareness Consequences of Perception that there Significant effects for
the issue is a social consensus consequences
on a response
What are the factors Framing marginally
influencing moral significant
awareness in
organizations
How the issue is Social consensus is
framed. significant
Is the industry Aggressive
aggressively competition
competitive significant
Greenberg, J. (2002). Employee theft Ethics programs Cognitive moral Ethics program
What are the combined development (CMD) interacts with CMD
effects of personal and and previous victim
situational variable on
employee theft
Previous victim of Significant direct
theft effects for all
dispositional and
situational factors

5
TABLE 1 (Continued)

6
Study and primary
question Dependent variable Situational factors Dispositional factors Reported results

Church et al. (2005): Misrepresenting Magnitude of Cognitive moral Reports significant


What are the factors product quality rewards and losses development direct effects for
influencing a person to magnitude of
act honestly? outcomes, gender,
CMD and significant
interaction between
CMD and
magnitudes of loss/
gain
Trevino and Youngblood Ethical decision Vicarious reward Locus of control High LOC exhibits
(1990): What are making significantly higher
situational factors ethical behavior

BUSINESS AND SOCIETY REVIEW


influencing ethical
decision making?
Vicarious CMD Outcome
punishment expectancies
significantly affect
decisions
Expectancy of Higher rewards yield
outcomes significantly higher
ethical conduct
Ashkanasy et al. (2006): Unethical decision Exposure to CMD Significant CMD by
Does the organizational making unethical practices just world beliefs
reward system influence interactions
decisions through
expectancy outcomes
GEORGE W. WATSON, ROBYN A. BERKLEY, ET AL.
TABLE 1 (Continued)
Study and primary
question Dependent variable Situational factors Dispositional factors Reported results

Just world beliefs Significant CMD by


just world
interactions
Outcome expectancies Significant
expectancy by CMD
interaction
Reward
Trevino (1986): Outline of Theoretical Organization culture CMD N/A
the person–situation
interaction model
Job context LOC
Work characteristics Ego strength
Field dependency

7
8 BUSINESS AND SOCIETY REVIEW

Other dispositional variables have been investigated in this


literature. For example Trevino (1986) theorized, and Trevino and
Youngblood (1990) empirically tested, the role of locus of control in
ethical decision making (Rotter, 1966). The latter paper reports
that a person with a higher internal locus of control will make
more ethical decisions. The role of personal values, however, has
not been tested. The present study examines this role.

Value–Pragmatics

We investigate the prospect that a person is pulled in more than one


ethically relevant direction through the application of the value-
pragmatic hypothesis (Hodges and Geyer 2006). This model recog-
nizes that contending values obligate a person to differing actions.
At the theoretical level, the value contention hypothesis is an
approach that depicts human moral nature as being of two minds
about how to proceed in an ethical dilemma. In fact, it is claimed
that a circumstance is ethically dilemmatic psychologically (as
opposed to morally) only because of the ambivalence one feels
toward alternative solutions. One’s ambivalence may be experi-
enced because of the nature of expected outcomes, with regard to
the principles and values expressed in the means used to achieve
those outcomes, or in some combination of both. Nevertheless, if it
is true that people making ethical decisions can be naturally moti-
vated by the multiple obligations levied by values, then models of
ethical decision making are compelled to reflect this nature.
Two assumptions underlie this proposition. First, the personal
importance of fulfilling an obligation resulting from a value rests in
part with the perceived situation one faces. That is, situational
factors invoke contending values. This suggests that values should
interact with these situational factors in systematic ways. For this
reason we rely on the person–situation interaction model for
advancing and testing these hypotheses. The second assumption
is that the motivation derived from values is experienced simulta-
neously. We posit that values that contend with each other will both
be cognitively cued in an ethical dilemma. This aligns our research
more closely with Schwartz’s conception of values. From a practical
view, Schwartz’s model suggests that values of hedonism and
beneficence contend such that it is possible for hedonism to be
the principal motivating factor in one set of circumstances, and
GEORGE W. WATSON, ROBYN A. BERKLEY, ET AL. 9

beneficence to be the motivating factor in another. This is consistent


with the value system justification approach outlined by Kristiansen
and Zanna (1988) and the ego affirmative role of values forwarded
by Watson et al. (2004) and Grube et al. (1994).
It has long been recognized that the role of personal values is to
allow for the regulation of one’s behavior (Rokeach 1973). According
to Rokeach (1973) values stem from our unique personal needs, such
that, if we have a need for affiliation we will value friendship. Incon-
sistencies between values and behaviors are expected to create
dissonances that are detectable through negative emotions such as
guilt or shame (Festinger 1957; Watson et al. 2004). Yet, people also
have values that are not linked to moral needs, but rather, needs
that encourage self-oriented satisfactions. In addition, there are cir-
cumstances in which we make decisions contrary to our better
judgment (Davidson 1984), and the experience of dissonance-induced
self-dissatisfaction is a possible response to our behavior. Conse-
quently, values are expected to assist us in making appropriate moral
decisions (Grube et al. 1994; Rokeach 1973). Beyond values’ direct
effects, however, come the more intriguing aspects of human moral
nature, namely the understanding that what makes a situation an
ethical dilemma for us is the recognition that any one course of
action yields desirable and undesirable outcomes (Tetlock 1986).
This occurrence is, in itself, a tacit recognition that we hold con-
tending inspirations for what counts as valuable and desirable.
In the broader construct of values, moral values are those that
invoke a prescription or proscription about what one should or should
not do relative to other’s best interests. The origins of these values,
although not uncontroversial, accounts for their motivating potential.
Some scholars find moral values to be much like deontological rules
(Baron and Spranca 1997)—if one values a world of beauty, for example,
one is personally prohibited from acting in ways contrary to that value.
Others have recognized that these moral values can be traded off
according to the contextual circumstances (Tetlock et al. 1994; Tet-
lock et al. 1996). At a minimum, the literature acknowledges that
values may conflict, and more than one value may compete in the
mind of the decision maker attempting to choose a course of action.
No definitive list of moral values has yet been agreed upon, and
for any list that may be formulated, there remain controversies
regarding a value’s definition, universality and measurement. Yet the
social sharing of values, particularly moral values, is relied upon by
10 BUSINESS AND SOCIETY REVIEW

members of a collective in order that we may reasonably trust in a


minimum threshold of social tolerance and support, as well as accep-
tance for our personal eccentricities and needs. As classical social
contract theory recognizes, persons gather in collectives, organizations
or otherwise, for their mutual advantage of avoiding Hobbesian chaos
(Hobbes 1561/1962). Sharing the value of equality, for instance,
will help to ensure that each member should have as much access
to a promising life as any other (Rawls 1971; Donaldson 1982).
In addition, moral values have been central to our constructions
of moral agency in that they provide us with the frameworks for becom-
ing aware of moral issues, reasoning through those issues, and providing
justifying grounds from which to embark upon a course of action
(Greenberg 2002). Currently, however, controversy still exists regard-
ing functional purpose of value systems in general or the motiva-
tional content of moral values in the person–situation model in
particular (Hauser 2006). In organizational ethics, the dominant
view of values’ purpose is still derived from Rokeach (1973) and
Kluckhohn (1951): values and value-systems are moral motivators
that contain trans-situational ends of varying importance and relative
stability, serving to prescribe or proscribe behavior (Schwartz 1996).
We posit that there are values that will encourage us to render a
socially optimal solution that meets the criteria for a moral deci-
sion. Nevertheless, people also hold values that encourage us to
make personally optimal decisions that do not meet the criteria for
a moral decision. The classical dilemma for this circumstance is a
conflict of interest. Other dilemmas, however, have these qualities
as well, as when deciding whether to blow the whistle, pay a bribe,
dump toxins off-shore, or misrepresent revenue figures. We further
argue that situational contingencies, such as rewards and punish-
ments, will interact with contending moral and nonmoral values
(e.g., values for pleasure, power, prestige or status versus benevolence,
and universalism) to influence outcomes in decisions and behavior.
Schwartz (1996) has constructed ten categories of values that
differentiate individuals. This list of values does contain both moral
and nonmoral value categories. The general categories for nonmoral
values are hedonism (containing values like pleasure seeking) and
power (containing values like social influence and domination).
Although each of us will weigh values differently, the substantive
meaning of a particular value type can be in direct opposition to the
substantive meaning of another value type. In Schwartz (1996) the
GEORGE W. WATSON, ROBYN A. BERKLEY, ET AL. 11

values that contend with hedonism and power are listed as benevo-
lence and universalism, respectively. In seeking out the role of
values in the person–situation hypothesis we hypothesize that both
value types are important in explaining the variance in morally
related judgments and will interact with situational factors.
Schwartz’s definition for these value types are: (1) universalism,
defined as an appreciation for the welfare of all people, (2) benevo-
lence, defined as having the qualities of helpfulness, forgivingness,
honesty and enhancement of people with whom one is in frequent
contact, (3) hedonism, defined as seeking pleasure and sensual
gratification for oneself and, (4) power, the seeking of social prestige,
status, and control. Universalism and benevolence are categories of
self-transcendent, moral values that involve how one conceives,
and behaves toward, other people. In contrast, power and hedonism
are self-enhancing and inwardly oriented values that involve how
one behaves in reaching privately held, personally satisfying, goals
and objectives. Consequently, and as depicted in Figure 1, our first
hypotheses are as follows: We propose that the nonmoral value type

FIGURE 1 Hypothesized Effects of Contending Values in the


Person-Situation Model.

*C = control variables
12 BUSINESS AND SOCIETY REVIEW

of “hedonism” will be significantly and positively related to unethical


decisions in an organizational vignette; the nonmoral value type of
“power” will be significantly and positively related unethical decisions
in an organizational vignette; the moral value type “benevolence”
will be significantly and negatively related to unethical decisions in
an organizational vignette; the moral value type of “universalism”
will be significantly and negatively related to unethical decisions
in an organizational vignette; and both morally relevant and
nonmoral values will simultaneously explain significant variance in
the unethical decisions.

Interactions and Ethical Decisions

Previous efforts at unveiling person–situation interactions have


predominantly evaluated ways the cognitive moral development
moderates the relationships between situational forces and decision
outcomes. A weakness of this approach is the high emphasis it places
on a person’s willingness to morally reason through dilemmas in spite
of contending desires and values (Gilligan 1982). We agree that con-
textual factors can make for unethical or immoral behavior, but features
of this situation are expected to interact with a person’s character to
entice people to ignore the moral impact of their decisions. Certainly, a
bad barrel is an important factor in individual behavior, but bad
apples, or bad features of otherwise good apples, play a role in decision
making as well. Consequently, for the present study we focus on the
relationships between value types, situational factors and unethical
decisions. Once again, Figure 1 depicts these relationships, indicating
that values of moral and nonmoral types will moderate the relation-
ship between situational variables and unethical decisions.

Hedonism, reward, and punishment. Patterns in values for


hedonism, or pleasure seeking, would be expected to vary with the
presence of a means for achieving pleasure—monetary rewards.
Responses to hedonism can reasonably be expected to combine
with patterns in situational factors that may satisfy or stifle the
hedonistic desires in ways that significantly explain variance in
unethical judgment. For example, if hedonism is defined as the
seeking of pleasurable self-gratifications of various types, then one
would anticipate that a person who values hedonistic outcomes will
be anxious to avoid unpleasant punishments. Or conversely, a person
GEORGE W. WATSON, ROBYN A. BERKLEY, ET AL. 13

who values hedonistic outcomes would be expected to respond


favorably to situational factors that result in rewards. As a result we
hypothesize that the situational factor of punishment will interact
with the personal value of hedonism to influence unethical decision
making and the situational factor of reward will interact with the
personal value of hedonism to influence unethical decision making.

Power, reward, and punishment. Persons who value control and


prestige are expected to be similarly influenced by rewards and
punishments. The effect of rewards and punishments on unethical
decision making is expected to be moderated by a desire for power.
Conventional morality will play a lesser role among those that
desire power. Consequently, the desire for power will moderate the
relationship between situational power-related factors and the
outcome decision (Sidanius and Pratto 1999). For example, a
person who values prestige and control is expected to be positively
influenced by rewards and negatively influenced by punishments.
This would include rewards and punishments attached to ethically
relevant decisions. As a result we test the following hypotheses: The
situational factor of punishment will interact with the personal
value of power to influence unethical decision making and the
situational factor of reward will interact with the personal value of
power to influence unethical decision making.

Universalism, reward, and punishment. Universalism, according


to Schwartz (1996), includes ideals of understanding, tolerance,
enhancement, and protection of the welfare of others as well as an
appreciation for a world of beauty. Universalism stands in virtual
opposition to the value of power. Universalism appears to share
many of the characteristics that are equally important in the sche-
matic frames of Rest’s moral reasoning at the higher levels (stages
5, 6, and 7). These higher stages are often described as concerning
social welfare and universal ideals of human justice (Rest et al., 1999;
Fisher and Lovell, 2006). For this reason we hold similar hypotheses
for universalism as has previously been posited for moral reason-
ing. Specifically, higher levels of universalism should reduce the
influence of situational factors on ethical decisions, and we offer
the following hypotheses: The situational factor of punishment will
interact with the personal value of universalism to influence unethical
decision making and the situational factor of reward will interact
14 BUSINESS AND SOCIETY REVIEW

with the personal value of universalism to influence unethical


decision making.

Benevolence, punishment, and reward. Our last set of hypothe-


sis address values that, according to Schwartz (1996), reflect for-
giveness, loyalty, responsibility, and friendship. These notions of
benevolence do not map directly to moral reasoning in Kohlberg’s or
Rest’s sense, but they are reflective of notions of caring for those
that one has important relationships with (Gilligan 1982). Never-
theless, it is likely that those situational factors that are perceived
as advancing the core meaning of benevolence will be more influen-
tial among those that score high on benevolence. The empirical
difficulty is determining which situational variables will be per-
ceived as advancing the cause of benevolence. We hypothesize that
punishments for wrongdoing will be understood as contrary to
benevolence, as it does not reflect forgiveness or loyalty. Moreover,
rewards of the type we have included in this study (rewards for
accomplishing work goals) are likely to be perceived as consistent
with benevolence. Consequently, we hypothesize that the situational
factor of punishment will interact with the personal value of
benevolence to influence unethical decision making. In addition,
the situational factor of reward will interact with the personal value
of benevolence to influence unethical decision making.

METHOD

Our sample consisted of 177 undergraduate and graduate students at


a medium-sized university in the Midwest United States. Fifty two per-
cent of the sample was female, 11 percent of the students were from
minority ethnic backgrounds, and the mean age was 22. One hundred
and ninety one surveys were administered, and 14 were not usable either
because of incomplete data (12 subjects) or illegible responses.
There were no decipherable patterns of differences between the 14
that were dropped from the sample and the 177 retained for analysis.

Design

We used a policy-capturing experimental design to craft the business


vignettes. In applying this approach the term “policy” becomes
GEORGE W. WATSON, ROBYN A. BERKLEY, ET AL. 15

understood as the importance an individual places on a particular


situational factor. Consequently, in diagnosing the situational
reasons for a morally relevant decision, it is useful to understand
how decision makers weight situational cues. Policy capturing “. . .
has provided a powerful way of thinking about policies and has
contributed greatly to our understanding of how decision makers
use policies” (Beach and Connoly 2005).

Procedure

Data collection took place in two phases. In the first phase subjects
were administered measures for moral reasoning, a demographics
questionnaire and value priorities. In the second phase, initiated
several weeks later, subjects were given the eight vignettes and
asked to make a judgment about how likely they would be to act as
in the same way as the person in the vignette. As a result there were
1,416 different decisions about how one would act. Respondents’
answers were matched using names, and because responses were
not anonymous the surveys were held strictly confidential.

Measures

Personal values. The Schwartz Value Survey was administered


to subjects in phase 1 of the data collection. This survey presents
the subject with 57 different values and asks the subject to rate
them according to the importance the value holds in their life. For
example, the overall characteristic of hedonism is measured by the
values of “pleasure,” and “enjoying life.” In addition, the construct
of power is measured by the values of “prestige” and “dominance.”
Conversely, universalism and benevolence are measured by values
like “social justice” and “forgiving” respectively. The subject rates
these values on an eight-point Likert type scale ranging from
“supreme importance” (7) to being “opposed to my values” (–1).
Related values are then clustered into 10 value categories.
Schwartz’s categories include universalism, hedonism, benevolence,
achievement, stimulation, self-direction, tradition, conformity, power,
and security.

Moral Reasoning. The Moral Judgment Test (MJT) (Lind, 1975)


was administered to subjects in phase 1 of data collection. We
16 BUSINESS AND SOCIETY REVIEW

chose the MJT for several reasons. First, it is considered a valid


measure of the consistency of one’s moral judgments across situa-
tional differences. Second, it is available free of charge from the
author, whereas dominant measure (the DIT-2) must be purchased
and scored by a proprietary service. Third, it is considerably shorter
than the DIT-2 having two scenarios to the DIT-2’s five. Because
the values instrument contained 57 questions, response fatigue
for subjects in this study was a concern. The composite score, or
“C-score,” is an indicator of how consistent the subject was in
applying principled or situational perspectives. Moral reasoning
was included as a control variable in each model.

Situational Factors. As described previously, three separate


factors were orthogonally varied on two levels. A full factorial design,
therefore, included eight different vignettes for all combinations of
these three factors. Each subject responded to all eight vignettes.
In other words, each subject provided eight judgments, each judg-
ment based on a differing combination of these three variables. The
three factors were: (1) the nature of the situation (environmental
dumping or sales revenue falsification), (2) the benefit of acting
unethically (staying on track in performance expectations, versus a
personal bonus), and (3) the punishment or costs (reprimand, no
punishment). A sample vignette is contained in the Appendix.
Significant factors were entered into each model.

Dependent Variable

Because we are endeavoring to discover whether a person will form


an intention to act unethically under conditions of balanced situa-
tional and dispositional variables, we asked subjects to respond to
the following question after reading the scenario: “Answering as
honestly and thoughtfully as possible, how likely do you think you
would be to make the same decision as Terry?” Subjects were asked
to rate on a seven-point Likert-type scale how likely they think they
would be to act the way the person in the scenario did. For example:
Responses ranged from “very unlikely” (1) to “very likely” (7). Conse-
quently, higher scores indicate a higher intention to act unethically.
All managers in the vignettes made the morally negative decision.
A decision is morally negative if the manager shipped toxic sub-
stances to locations where he/she knew it would harm others, or if
GEORGE W. WATSON, ROBYN A. BERKLEY, ET AL. 17

the manager falsified sales reports. All managers’ names were meant
to be gender neutral and were altered in each vignette.

RESULTS

Because higher scores on the dependent variables indicated that


the subject was more likely to be motivated to act unethically,
we expect to see positive correlations with the values of power and
of hedonism. We also expect to see subjects’ responses correlate
negatively with values of universalistic welfare or benevolence.
Moreover, moral reasoning correlated power and universalism values.
Preliminary analysis was conducted on the demographic vari-
ables of age and gender. Although gender did seem to be a factor in
reports of moral judgment, age did not. This finding is consistent
with the previous findings in the field. Neither of these variables,
however, reached significance in the initial regressions that included
all hypothesized variables (Gender; ß = –0.014, p ≤ 0.69. Age;
ß = –0.013, p ≤ 0.72). Consequently, these demographic variables
were removed from further analysis as we focused on the hypothe-
sized relationships.

Hypothesized Relationships

Table 2 displays the independent variables, beta weights, r2s and


F scores for changes in r2 resulting from testing the hypotheses.
We first asked whether hedonism and power as nonmoral values
were simultaneously significant with the moral values of benevo-
lence and universalism. To test these hypotheses we entered the
situational factors of rewards and punishments and the disposi-
tional factor of moral judgment into the base equation (model 1).
We then stepped in the values of benevolence, universalism,
hedonism, and power. As indicated in Table 2, models 1 and 2, the
values of hedonism, universalism, benevolence, and power add
significantly to the explained variance over and above the control
variables (F = 37.580, r2 = 0.184, p ≤ 0.001). Moreover, each is
significant and each is in the expected direction. As a result we
have support for hypothesis that tests the value–pragmatics
premise: that all contending values simultaneously influence
decisions.
18
TABLE 2 Regression Models, Beta Weights, r2’’s and F-Ratios
Variable Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9 Model 10

Reward 0.178*** 0.172*** 0.171*** –0.105 0.173*** –0.074 0.173*** 0.0192 0.185*** 0.056
Punishment –0.287*** –0.286*** 0.084 –0.297*** 0.097 –0.298*** –0.585*** –0.286*** 0.040 –0.286***
Moral Reasoning –0.222 –147*** –0.147*** –0.148*** –0.147*** –0.149* –0.153*** –0.147*** –0.134*** –0.147***
Power 0.153*** 0.159** 0.159*** 0.241*** 0.114** 0.158*** 0.154*** 0.138*** 0.153***
Hedonism 0.142*** 0.227*** 0.089* 0.142*** 0.151*** 0.145*** 0.142*** 0.129**** 0.142***
Universalism –0.084** –0.094** –0.094** –0.084** –0.108** –0.155*** –0.080† –0.061* 0.084**
Benevolence –0.128*** –0.130*** –0.131*** –0.127*** –0.122*** –0.122*** –0.128*** –0.107** 0.144***
Punish x Hedonism –0.397**
Reward x Hedonism 0.288*
Punish x Power –0.403***

BUSINESS AND SOCIETY REVIEW


Reward x Power 0.250*
Punishment x Universe 0.304*
Reward x Universe –0.023ns
Punishment x Benev0.
Reward x Benevolence –0.241†
0.118ns
F Δ r2 290.225*** 80.646** 40.523* 100.399** 40.036* 40.287* 0.024ns 30.048† 0.375ns
r2 0.158*** 0.245*** 0.264*** 0.261*** 0.252*** 0.267*** 0.256*** 0.245*** 0.225*** 0.245***

***p ≤ 0.001.
**p ≤ 0.01.
*p ≤ 0.05.
†p ≤ 0.10.
GEORGE W. WATSON, ROBYN A. BERKLEY, ET AL. 19

The remaining models evaluate the moderating effects of values


on the relationship between situational factors and decision out-
comes. Model 3 tests whether hedonism moderates the relationship
between punishment and unethical decisions. As the model indi-
cates, the interaction is significant. The graphical representations
of all the significant interactions are presented in the Appendix.
Interestingly, and as model 3 indicates, those high in hedonism are
less likely to act unethically when the punishments are high than
those low on hedonism. Model 4 tests the moderating effects of
power on the relationships between reward and unethical decisions.
As expected, those high in hedonism are more likely to be influ-
enced to act unethically if the rewards are high than those low
on hedonism.
Model 5 examines the moderating effects of power on the rela-
tionship between punishment and ethical outcome. As the model
indicates, those with a high value for power are likely to act more
unethically than those with a low value for power when the punish-
ments are low. Similarly, those with a high value for power are likely
to act more unethically when the rewards are high (model 6). Model
7 tested the moderating effects of universalism on the relationship
between punishment and ethical decision making. As anticipated,
those low in universalism are more likely to act unethically when
the punishments are low than those who are high in universalism.
Model 8 tested the moderating effect of universalism on the rela-
tionship between rewards and ethical decision. No significant effect
was discovered, thus this hypothesized relationship was not sup-
ported. The moderating effect of benevolence for the relationship
of punishments to ethical decisions was marginally significant
(model 9). Those high in benevolence were less likely to decide
unethically in the high punishment condition. Finally, model 10
tested the moderating effects of benevolence of rewards on unethi-
cal decisions, but no significant interaction was revealed.

DISCUSSION AND CONCLUSIONS

Our models indicate that that the situational factors of reward


and punishment have significant influence on the decision maker.
Moreover, in support of previous research, moral judgment is a
significant dispositional factor in decisions. Importantly, model 2
20 BUSINESS AND SOCIETY REVIEW

demonstrates that both moral and nonmoral values are simulta-


neously influencing decisions. We also located significant interac-
tions in six out of the eight tests. Together these tests reveal a
number of significant interactions. In short, the value pragmatics
position of multiple contending values simultaneously influencing
ethical behavior was supported. Moreover, the person–situation
interaction model was further bolstered as the situational factors
interacted with a number of dispositional factors to demonstrate
statistically significant influence. Furthermore, all control variables
(reward, punishment, and moral reasoning) were significant, align-
ing this study with previous research on these variables.
Overall, these results support our assertion that there are multiple
dispositional factors and multiple situational context factors that
are in contention and influencing our moral judgments. As our
literature review indicated, the range and frequency of tests for
direct and indirect effects for both dispositional and situational
variables has been somewhat constrained to moral reasoning
capacities. Consequently, our study contributes support for the
direct and indirect effects of moral and nonmoral values. It further
supports previous findings that punishments and rewards influence
ethical decisions.
Both the moral values of benevolence and universalism, as well
as the nonmoral values of hedonism and power, were each
significantly correlated with and predictive of ethical decisions. We
conclude, consistent with a depiction of human nature made
ambivalent by contentious personal goals, nonmoral values are
among the dispositional variables that will predict ethically relevant
judgments. Moreover, the nonmoral values of hedonism and power
moderated the relationship between situational factors and deci-
sion outcomes. This presents further evidence of direct and indirect
effects for nonmoral dispositional factors significantly influencing
judgments of morality in varied situational contexts of punish-
ments and rewards. In fact, the indirect effects of moral values,
although demonstrating some significance, was less influential the
indirect effects of nonmoral values.
Our goal has been to build upon the person–situation interaction
model by investigating how competing dispositional factors and
situational factors may interact to significantly influence ethical
judgments. We found evidence supporting the person–situation
hypothesis and value–pragmatics model. Furthermore, both
GEORGE W. WATSON, ROBYN A. BERKLEY, ET AL. 21

nonmoral and moral values significantly contribute to the variance in


ethical decision making simultaneously. In addition, to augment
previous literature that has found interactions between situational
factors and morally relevant dispositional characteristics, we have
found significant interactions between situational variables and
the nonmoral values characteristics of hedonism and power. Going
forward, research should reflect both the positive dispositional
influences on ethical decision making and the negative influences
to portray a more realistic picture of the decision maker.
As with all empirical studies we confront several limitations.
Multiple factors converge to influence a decision maker—the multi-
ple social mechanisms that encourage or discourage behavior com-
bine to make the presence or absence of reward and punishment
meaningful. In full factorial designs, however, including just one
additional variable (for example raising the number of factors from
three to four) literally doubles the number of scenarios the subject
must read, detect differences in, and respond to. Thus including
more situational factors comes at a significant cost in response
fatigue and ultimately reliability. Fractional factorial designs have
been applied to overcome this problem, but they too come at a price;
specifically, the inability of analyzing higher-order interactions
among the factors.
In addition to the limits on a reasonable number of factors, is the
issue of whether the scenarios adequately reflect reality. We think
the combination of how one is compensated, the policies directed at
punishing unethical behaviors, and the overall nature of the ethical
violation is a realistic reflection of the business environment. Some
might argue that it is unlikely to find punishments for ethical
behavior in an environment that compensates an employee solely
on sales revenues. Nevertheless, we see no reason to expect that
both punishments and rewards cannot coexist in the way we have
operationalized them in this study.
There are several other interesting questions from the research
perspective. The question of how some contextual factors emerge as
significant and others do not lead us to question the role of national
culture in factor weightings; would shame play a greater role in
East Asia? Would prospective feelings of guilt play a larger role in
the northern Mediterranean regions than in North America?
A second research stream might examine why one contextual
variable would have only direct effects, or why another would have
22 BUSINESS AND SOCIETY REVIEW

only indirect effect and a third with have both direct and indirect
effects on moral judgments. Is there a relationship between global
variables such as moral intensity of the issue itself and cognitive
capacities for moral reasoning? In other words, is the evaluation of
the broader moral issue conducted with deontological rules, while
the impact of reward and punishment are evaluated with utilitarian
rules? Conversely, will a situational variable such as a company
policy show more direct effects due to the cognitive efficiencies of
linking less ambiguous factors (such as rewards or punishments) to
ethical judgments?
Punishments were weighted at surprisingly high levels of direct
and indirect significance. There are, however, multiple attenuating
possibilities for implementing a deterrence strategy, including; the
probability of one’s actions being discovered, the consistency with
which punishments are administered, the effectiveness of commu-
nicating that punishment is administered while still maintaining
privacy, and the severity of the punishment. Assuming that all
three of these factors are high, there is still the possibility that a
high tolerance for risk will mitigate their effects.
We think punishments, however, have something to say to
managers as well, and that the factors of surveillance, communi-
cating the results, consistent punitive responses with adequate
severity will strongly influence ethical judgments. Each of these,
however, deserves careful deliberation so that principles of organi-
zational justice remain intact. Unreasonably severe punishments
will appear unjust, and meager punishments may be interpreted as
tacit tolerance for unethical behavior.
A second factor important to practice is that the moral intensity
of a situation is likely not to be immediately felt, but that situational
factors motivating behavior are likely to be to have immediate
impact. The business outcomes of a decision often take time to develop
and are sometimes quite ambiguous at the time the decision is made
(Bazerman 2006). Moreover, these situational factors may cue non-
moral considerations, such as nonmoral values of hedonism or power,
to moderate the relationship between the factor and the ethical judg-
ment, and offset one’s moral reasoning capacities. This further empha-
sizes the importance of shared values, organizational culture, and
ethical climate in providing the employee with prescriptive guidance.
This study adds some clarity to the often blurred relationship
between personal values and organizational performance. Advocates
GEORGE W. WATSON, ROBYN A. BERKLEY, ET AL. 23

of a “shared values” approach to managing ethics programs may


take heart in the findings that values do matter. But they matter in
both directions: That is, a shared value of “achievement” may be
detrimental to ethical behavior in some organizational cultures.
This problem was well documented by Elkind and McLean (2004) in
their analysis of Enron’s collapse.
Human moral nature does seem to be wholly determinate. In
some cases nonmoral factors win out, and on other occasions
moral values holds sway. It remains a formidable challenge of
emerging applied theories to help us to better understand the
contingent and dispositional factors that will allow us to better
predict and understand how humans will behave within a given
structural context and how they are constrained by their unique
dispositions.

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26 BUSINESS AND SOCIETY REVIEW

APPENDIX

The analytical approach used in this study is called Policy Captur-


ing or Judgment Analysis. Policy capturing is reported to have sev-
eral advantages over other types of data collection methodologies
routinely used in the analysis of ethically related decisions. One
alternative, for example, would be to ask subjects how important
the factors rewards for performance and punishments for unethical
behavior are in an ethically relevant decision (Batson et al. 1999;
Batson et al. 2002; Batson et al. 2006). In subject responses
regarding right and wrong, however, social desirability bias has
been an important impediment (Judge and Bretz 1992; Karren and
Barringer 2002). Rating or ranking the attributes that effect out-
comes also requires more self-insight than is necessary when
responding to vignettes. In fact, it is not unheard of that decision
makers sometimes act solely on intuition. Moreover, vignettes are
thought to be more reflective of reality and context than alternative
methods (Karren and Barringer 2002). This is an important feature
for the person–situation interaction model. An additional advantage
rests in the ability to orthogonally manipulate variables of interest.
Intercorrelations between variables are zero or near zero. This
allows the researcher to gain an appreciation of the importance of
any one variable for decision makers.
Scenarios have been routinely used in studying the effects of var-
ious factors on ethical decisions and motivations (Butterfield et al.
2000; Cavanagh and Fritzsche 1985; Weber 1981). In the present
case regression is applied to assess the impact of these factors. We
also measured several demographic variables and the dispositional
variables of values and moral reasoning and expect interactions
between the experimental variables and the dispositional variables,
supporting the person–situation hypothesis.
With this in mind we developed three factors that the literature has
previously indicated as important situational factors. The ethical
situation itself is expected to have more or less moral intensity (see
e.g., Jones 1991), as do both rewards (e.g., Trevino and Youngblood
1990) and punishments (e.g., Trevino and Youngblood 1990). Because
there are three such factors to be orthogonally varied at two levels,
a full factorial design requires (23) eight vignettes. As table A1 illustrates,
however, the moral situation did not significantly relate to the decision
outcome, and we dropped that factor from further analysis.
GEORGE W. WATSON, ROBYN A. BERKLEY, ET AL. 27

Descriptive Statistics and Alpha Coefficients

Table A1 reports the means, standard deviations, and correlations


for the study variables. The table displays the relationships between
the target situation, moral reasoning, potential rewards and
punishments, universalism, power, hedonism, and benevolence as
well as the outcome variable of judgment.
The alpha coefficients for multi-item value scales are listed on
the diagonal. The alpha coefficients for power and benevolence
are marginally acceptable for our sample. Alpha coefficients were
recently reported by Schwartz (Schwartz 2006). Schwartz’s Alpha
coefficients for traditionalism ranged between 0.61 and 0.71 and for
universalism ranged between 0.61 and 0.75. Some alpha coefficients
for the Schwartz factors average lower than the broadly accepted
level of 0.70 but meet the base criteria of 0.60 (Nunnally 1978). In
closer examination of these value constructs Schwartz is asking
subjects to indicate how much they value diverse characteristics
such as “responsibility” and “friendship.” Power values are similarly
diverse, asking the subject to rate both “dominance” and “prestige.”
This is to say that value categories such as benevolence, universalism,
hedonism, and power are constituted by a diverse set of ideals.

Results of Interactions

Figure 1A contains illustrations of the nature of the interactions


for those that were significant (models 3 through 7 and model 9).
These figures assist the analyst in understanding the ways in which
various values moderate the relationship between the situational
factors and the decision outcome.
Figure A2 is an illustration of the scenarios we used in this study.
The alternate wordings are in parentheses.

FIGURE 1A Analysis of Interactions.

FIGURE 1A1 Hedonism as a Moderator of Rewards.

FIGURE 1A2 Hedonism as a Moderator of Punishment.

FIGURE 1A3 Power as a Moderator of Reward.

FIGURE 1A4 Power as a Moderator of Punishment.


28
TABLE A1 Descriptive Statistics, Correlations, and Cronbach Alpha Coefficients

Variable Mean S00.D00. 1 2 3 4 5 6 7 8 9

100. Moral Issue 00.50 000.50 00.000


200. Reward 00.50 00.50 00.000 00.000
300. Punishment 00.50 00.50 00.000 00.000 00.000
400. Decision (DV) 200.84 100.60 –00.031 00.18*** 00.27*** –
500. Moral Reasoning 300.64 100.59 00.001 00.001 00.001 00.10** –
600. Universalism 400.48 00.953 –00.001 –00.001 00.003 –00.12** –00.12** (00.748)

BUSINESS AND SOCIETY REVIEW


700. Power 300.99 00.939 00.002 00.002 –00.002 00.22*** 00.16*** 00.00.22*** (00.647)
800. Hedonism 500.02 100.01 00.002 00.002 00.000 00.21*** 00.06 00.21*** 00.55*** (00.711)
900. Benevolence 500.33 00.729 00.000 00.000 –00.002 –00.189*** –00.08 00.47** 00.002 00.09* (00.620)

†P ≤ 0.10.
*P ≤ 0.05.
**P ≤ 0.01.
***P ≤ 0.001.
GEORGE W. WATSON, ROBYN A. BERKLEY, ET AL. 29

FIGURE 1A5 Universalism as a Moderator of Punishment.


FIGURE 1A6 Benevolence as a Moderator of Punishment.

Example Scenario
(Alternate wordings and factors are in parentheses)
Situation: (Moral Issue) sales revenue shortfall (environmental
off-shore dumping)
The Problem: As Tyler reviewed the sales figures for the third
quarter it was clear that they fell short of the quota the sales teams
were given. However, Tyler reasoned that next quarter would be
much better, and things would even out. The trouble was, every-
body had a short-term perspective and wanted immediate results.
Tyler considered whether the numbers should be made to look
more positive than third-quarter results indicated.
The Alternatives: Tyler considered the two alternatives. The first
was to report the numbers the way they were. The second was to
ship some of the products that were going to be sold next quarter to
the company’s largest customers. Although these items would not
be paid for until next quarter, they would appear to have been sold
in this quarter.
The Facts: 1. (Reward) This move would keep Tyler and the sales
force out of hot water (Tyler would receive a $30,000 bonus for mak-
ing sales quotas). 2. (Punishment) Last year someone had done
something similar (insert) and was given a stern reprimand and was
almost fired (but it was swept under the rug).
In the end Tyler decided to ship the products to several good cus-
tomers with the understanding that they would not have to pay for
the product until they needed it.
(Decision) Answering as honestly and thoughtfully as possible,
how likely do you think you would make the same decision as Tyler?

Very Somewhat I am not Somewhat Very


unlikely Unlikely unlikely sure likely Likely likely

1 2 3 4 5 6 7