Is Business Ethics Too Important to be Left in the Hands of Business: A Democratic Alternative?

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[We’re pleased to welcome author Carl Rhodes of the University of Technology, Sydney. Rhodes recently published an article in Organization Studies entitled “Democratic Business Ethics: Volkswagen’s Emissions Scandal and the Disruption of Corporate Sovereignty,” which is currently free to read for a limited time. Below, Rhodes reflects on the inspiration for conducting this research:]

Cover image for latest issue of Organization Studies

When people think of business ethics they normally imagine what businesses can or should do to be judged as ethical.  Whether the focus is on breaches of ethical norms by corporations, or models for the achievement of ethical business, the common approach is that it is organizations themselves who are the ethical agents.

This assumption is limited because it fails to account for how corporate responsibility does not necessarily arrive through the voluntary actions of corporations themselves. In response, in my own research I have been exploring a more democratic and socially focussed understanding of how business ethics is practiced.  The results were recently published in my article in Organization Studies called ‘Democratic Business Ethics: Volkswagen’s Emissions Scandal and the Disruption of Corporate Sovereignty’

The 2015 Volkswagen emission scandal illustrates what I call democratic business ethics; an ethics where citizens and the institutions of civil society hold corporations to account for their actions, and in so doing disrupt the self-interested abuse of corporate power.  At the time the scandal broke, Volkswagen was the world’s largest auto manufacturer, and a company widely heralded for its environmentalism and its corporate social responsibly activities.  Despite impeccable ethical credentials, the scandal revealed a corporation whose success had been boosted by sophisticated cheating on fuel emission tests.

The paper shows how Volkswagen was brought to justice for its actions not because of its own proclaimed ethics or moral hubris, but because of the interaction of individuals and institutions from outside of business, in this case NGOs, scientists, law makers, government agencies, the media, and the general public.  This was a demonstration how business ethics manifested in the interruption of a flagrant case of corporate fraud, deceit and criminality.

The paper develops the idea of democratic business ethics by focussing on how civil society in particular can and should ensure that corporations are made morally responsible for what they do. This is an ethics made practical through forms of dissent and contestation that redirect power away from centres of organized wealth and capital, returning it to its democratically rightful place with the people.

The conclusion is that business ethics is far too important to be left in the hands of business, and needs to be exercised in the democratic sphere so that corporations are serving society rather than the other way around.

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How Do Individuals Judge Organizational Legitimacy?

[We’re pleased to welcome author Melanie Eichhorn of the ESCP Europe Business School. Eichhorn recently published an article in Business and Society entitled “How Do Individuals Judge Organizational Legitimacy? Effects of Attributed Motives and Credibility on Organizational Legitimacy,” which is currently free to read for a limited time. Below, Eichhorn reflects on the inspiration for conducting this research:

 

BAS_v50_72ppiRGB_powerpointWhat motivated you to pursue this research?

Almost all of the leading scholars in the field of organizational legitimacy perpetually emphasize the need for empirical studies that investigate how individuals judge whether or not organizations are legitimate, i.e. whether they are perceived to comply with social norms and values. The current lack of such studies creates an unpleasant situation. Our knowledge about what goes on in our minds when judging the legitimacy of corporate behavior basically rests on theoretical models. To close this gap there is hardly a way around insights from social psychology research. Social psychological reasoning does not only allow comprehending cognitive processes of individuals but also demonstrates how individuals influence institutions.

At the end of the day it was the match between the given research gap and our interest in psychological research that motivated us to work on this project.

In what ways is your research innovative, and how do you think it will impact the field?

The belief-attitude approach applied in our study explains that collective and individual judgments are not necessarily congruent and that two individual beliefs—attributed motives and the perceived credibility of the organization—lead to a change in individuals’ legitimacy judgment.

Being cautiously optimistic we hope that our study will be only one out of many future studies that experimentally investigate individual legitimacy judgements in organizational research. Experimental vignette studies are a promising data collection technique because they combine the advantages of a laboratory experiment—high internal validity—with those of a field experiment—high external validity. Currently such studies are quite rare in business and society research. Hence, our study hopefully promotes the use of experiments in studies dealing with such issues. Thereby, legitimacy is only one out of many fascinating objects of research.

What is the most important/ influential piece of scholarship you’ve read in the last year?

We would like to seize this opportunity and highlight a recently published article by Finch et al. (2015). For our research area we regard this study as important. It deals with individual legitimacy judgements in regard to the oil sands industry in Canada. Even so the study was overlooked by recent reviews—we deem it the most promising approach to further explore how people judge organizational legitimacy.

The key element of their study is the definition of legitimacy as an attitude. This allows for applying an abundance of scholarly work from decades of social psychology research to the investigation of individual legitimacy judgments. These various existing insights on attitude formation and attitude change as well as those on belief building and belief adjustment provide several fruitful avenues for future research.

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Website Stories in Times of Distress

[We’re pleased to welcome author Alexia Panayiotou  of the University of  Cyprus. Panayiotou recently published an article in Management Learning entitled “Website Stories in Times of Distress,” co-authored by George Kassinis. From Panayiotou:]

What inspired you to be interested in this topic? My co-author and I have been interested in tmlq.jpghe use of corporate websites as a powerful communication strategy for several years. I was mostly interested in the power of visuality and George interested in questions of greenwashing. We had been following the BP website since 2005, as part of a larger project on the use of green imagery by oil companies. A few weeks before the Deepwater Horizon disaster, we were ready to submit a paper about BP’s website arguing, in fact, that BP’s commitments offered a novel way through which oil exploration and environmental responsibility could co-exist. We even classified various problems that could have “warned” us about BP’s practices as “accidents.” When Deepwater Horizon happened, our ready-to-be-submitted draft became irrelevant. After the shock we underwent both as researchers and as dedicated environmentalists who had clearly misread the greenwashing signs, we decided to reframe our research question vis-à-vis the disaster to study how a company changes its visual story in times of distress. Our realization that even we could be “hijacked” by the corporate story—the corporate agenda had clearly overflown into our own act of research—forced us to refocus our assumptions and questions. It is in this context that corporate power, enabled through website use, became critical to our investigation as our experience highlighted the dangerous potential of becoming “accomplices” to this power.

Were there findings that were surprising to you? The most “surprising” finding was not only the change in the visual story told but the way in which this new story was constructed on the website. In addition, as noted above, we were shocked by how the “liquid organization” had co-opted us in the telling of its story through our own act of navigating the website, making us potential “accomplices” in the telling of its corporate story. We saw this as problematic for many reasons, but mainly because the co-telling of a story through website navigation could result in (paradoxically) solidifying what Zygmunt Bauman calls “liquid power” or “the art of escape from all forms of social responsibility,” especially in cases of corporate hypocrisy.

How do you see this study influencing future research and/or practice? Corporate websites are surprisingly under-explored in organization studies, despite the so-called “visual turn.”  There are several reasons why website study should feature in our research agenda on management learning: First, websites serve as corporate “storytellers” as they transmit both high-level management messages and the corporate identity to outsiders. Second, , websites differ from other forms of corporate communication since the website user is dynamically involved in the “telling” of the corporate story through his or her navigation act; as such, the user is less a recipient and more a co-constructor of this story. Third, websites, as the most ‘fluid’ of all organizational constructs, may be the most appropriate means through which to study the non-committal, shifting organization of “liquid modernity.” Mobilizing website study in management practice and education can provide a better understanding of “corporate hypocrisy” in a liquid, modern world, especially in times of distress!

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The Normalization of Corruption and Wells Fargo’s 2 Million False Accounts

14040090880_7ba42ec582_z[We’re pleased to welcome J.S. Nelson, Senior Fellow at the Zicklin Center for Business Ethics Research at Wharton, and an Advisor in the Center for Entrepreneurial Studies at the Stanford Graduate School of Business. Nelson recently published an article in the Journal of Management Inquiry entitled “The Normalization of Corruption.” From Nelson:]

My paper in the Journal of Management Inquiry’s upcoming special issue on corruption describes how corruption becomes a new norm across individuals, companies, and then industries. Entitled “The Normalization of Corruption,” the paper relies on findings from law, organizational behavior, and surveys of the workplace to describe the norm in terms of behavioral ethics, how it reproduces, and how it grows.

The discussion focuses on how the normalization of corruption is built by individuals, spreads to companies, and then to industries. It further describes how the very normalization of the corruption protects individuals singled out for their misconduct from punishment by the legal system.

The specific examples in the paper are taken from the financial industry and the 2015-16 Volkswagen emissions scandal. This week’s headlines about widespread fraud at Wells Fargo follow the same patterns: cheating became the norm at Wells Fargo because of intense pressure from top executives; those top executives deny personal responsibility; and the legal system gives us few options to prosecute them for behavior that is otherwise widespread. Systemic fraud ensues.  Wells Fargo created over 2 million unauthorized accounts for customers, charged at least $1.5 million in unwarranted fees for those sham accounts, and over 5,300 employees were involved.

Similar to the social pressures that fueled the 2007-08 financial crisis, managers inside Wells Fargo pushed their employees to lie, cheat, steal, and to bend the rules in any imaginable way to satisfy sales goals and make profit. Employees were told to sign up their mothers, siblings, and friends; instructed to hunt for sales at bus stops and retirement homes;and often targeted elderly clients and people who did not speak English well.When employees protested that “This doesn’t make sense” and “Where are you getting these sales goals?”managers would answer, “No, you can do it”or “You’re negative”or “Oh, you’re not a team player.”Ethical employees who reported to hotlines and through the chain of command were fired for insubordination. Wells Fargo human resources personnel admit that the bank had a playbook for watching any employees who reported and then finding ways to fire them for another reason.

Now the bank faces the growing threat of a private class action lawsuit by ethical employees who were fired, and two top executives will have parts of their pay clawed back by the company’s disgraced board. But the rest of the legal system appears paralyzed to effectively enforce consequences on key individuals.

How did we arrive at this point of broadly corrupt norms? And more importantly, how do we turn around a system that has normalized corruption? The “Normalization of Corruption” JMI paper delves into these questions with immediate application for today.

[Please look for the follow-up entry this week on the origin of the paper, “The Normalization of Corruption.”]

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*Wells Fargo Image attributed to Mike Mozart (CC).

How Do Employees’ Perceptions of Workplace Fairness Affect Organizational Commitment?

[We’re pleased to welcome M. Ángeles López-Cabarcos of Universidad de Santiago de Compostela in Spain. She collaborated with Ana Isabel Machado-Lopes-Sampaio-de Pinho and Paula Vázquez-Rodríguez on their article “The Influence of Organizational Justice and Job Satisfaction on Organizational Commitment in Portugal’s Hotel Industry,” which was recently published in Cornell Hospitality Quarterly.]

  • What inspired you to be interested in this topic?

Employees’ identification with and involvement in their organization is very important in cqx covercompetitive environments like the hospitality industry, which is characterized as a service-oriented industry with high employee turnover. Because in the hotel industry it is necessary to adapt to customer’s needs, it is important to analyze the role that each employee plays in delivering the service. This is especially necessary considering that the employee is the first-hand representation for the customer of the organization’s vision. To achieve a higher level of service, managers need committed employees that promote the organization’s values, while providing a high-level of service quality, which in turn brings positive results for the organization. For this reason, research on employees´ organizational commitment is quite pertinent to aid the hotel industry in maximizing quality results. Furthermore, it is crucial that researchers identify specific variables that increase employee commitment in organizations. This is particularly important for the Portuguese hotel industry, as the hypothesized model has not been examined in this specific context.

  • Were there findings that were surprising to you?

The special characteristics of the context can explain the results obtained: i) rewards and the justification and explanation of managerial decisions are not the only factors that influence the commitment of hospitality-industry employees; ii) if hospitality-industry employees are satisfied with their jobs, they are likely to develop affective and normative commitment; (iii) rewards received and the quality of interpersonal relationships can influence job satisfaction; (iv) in order to achieve employee commitment, managers should make a special effort to explain all the procedures and systems used to their employees and ensure that they are satisfied with their jobs; and v) job satisfaction is a key variable when it comes to obtaining employees with affective and normative commitment, also, rewards and interpersonal relationships are significant variables that result in satisfied employees.

  • How do you see this study influencing future research and/or practice?

Firstly, this study tries to make a contribution to the “increasingly crowded conceptual marketplace” (Pfeffer 1993), replicating some hypotheses supported in previous studies, and testing hypotheses supported previously but not in the context of the hospitality industry to shed light on relationships that have mixed findings in the literature. According to Davis (2010), this study is a “quasi-experiment” and the organizational results “need not be general, predictive or precise to be useful” (p. 33). The value of the present research lies in its substantive importance for the functioning of the Portuguese hotel industry rather than for its contribution to theory.

On the other hand, the hotel industry cannot aspire to high competitive levels of quality in service if its employees are not committed to it. Therefore, when employees are committed to their work, they can focus their energies on customer service and are more willing to help and cooperate. Hence, the major challenge of human resource management lies in studying, creating, and implementing appropriate management tools through which employees develop commitment to organizational objectives and integrate them into their own. So, future lines of research in hotel industry context should analyze the role of several control variables, other variables related to organizational commitment, as well as other possible moderators thereof. Other studies could be carried out in other geographical areas in order to offer more generalizable results across different regions.

Click here to read “The Influence of Organizational Justice and Job Satisfaction on Organizational Commitment in Portugal’s Hotel Industry” for free from Cornell Hospitality Quarterly. Want to know when the latest research is available from Cornell Hospitality Quarterly? Click here to sign up for e-alerts!

MALCM. Ángeles López Cabarcos, Ph.D. Business Administration by Santiago de Compostela University (Spain). Professor at Faculty of Business Administration (Santiago de Compostela University) and UOC. Her research interests focus on organizational behaviour, labour climate, human research management, and bullying at work.

Ana Isabel Machado-Lopes-Sampaio-de Pinho, Ph.D. Business Administration by Santiago de Compostela University (Spain). Professor at Instituto Superior da Maia (ISMAI) do Porto (Portugal). Her research interests focus on organizational behaviour, labour climate, human research management, and bullying at work.

PVRPaula Vázquez Rodríguez, Ph.D. Business Administration by Santiago de Compostela University (Spain). Professor at Faculty of Business Administration (Santiago de Compostela University). Her research interests focus on organizational behaviour, labour climate, human research management, and bullying at work.

Did You Hear? When Rumors Are Used As Revenge At Work

scandal-1113908-mAccording to a 2008 study done by the publishers of the Myers-Briggs Assessment and the Thomas-Kilmann Conflict Mode Instrument, 85% of employees at all levels are involved in workplace conflict to some degree. In the United States alone, time spent dealing with this conflict equates to an average of 2.8 hours weekly, or approximately $359 billion in paid hours. This conflict can take many forms, including that of workplace bullying and revenge. A recent study published in Group and Organization Management entitled “Rumor as Revenge in the Workplace” looks at rumors as retaliatory tool in an organizational setting.

The abstract:

Two studies that examined the role of revenge in rumor transmission and involved working adults as participants are reported. Study 1 used hypothetical 06GOM10_Covers.inddscenarios to manipulate organizational treatment of an employee and the believability of a rumor. Participants had higher intention to transmit a harmful rumor when the organization broke job-related promises (i.e., breached the psychological contract) and revenge motivation mediated this relationship. Believability of the rumor had no effect. Study 2 used a field survey methodology and, controlling for social desirability, replicated the results for self- and peer-reported rumor transmission behavior. Study 2 also showed that participants’ belief in negative reciprocity norm strengthened the relationship between breach and revenge motivation.

Click here to read “Rumor as Revenge in the Workplace” for free from Group and Organization Management. Want to be notified about research like this from Group and Organization Management? Click here to sign up for e-alerts!

Summer Reading: Corporate Wrongdoing and the Art of Accusation

9780857287946_1_2Looking for some summer reading for those hazy, lazy days of July? Donald Palmer’s review of Robert R. Faulker’s book “Corporate Wrongdoing and the Art of Accusation” appeared in the June issue of Administrative Science Quarterly.

Robert R. Faulker: Corporate Wrongdoing and the Art of Accusation. New York: Anthem Press, 2011. 192 pp. $32.95, paper. ISBN 9780857287946.

Inquiry in contemporary organizational theory into the causes of wrongdoing in and by organizations can be neatly packaged in a very small box. It exclusively focuses on the factors that can lead organizational participants and organizations to engage in wrongdoing, concentrating on factors related to rational choice, cultural prescriptions, and performance strain. Further, it analyzes a narrow range of types of wrongdoing: types that result in administrative sanctions, civil judgments, and criminal convictions. Organizational scholars for the most part completely ignore the labeling process by which organizational behaviors are designated wrongful and organizational actors are classified as wrongdoers. This labeling process is an important cause of wrongdoing. Simply put, there can be no wrongdoing unless someone or some organization draws a line separating right from wrong. Organizational theorists for the most part also ignore the large volume of wrongful behaviors that do not result in administrative sanctions, civil ASQ_v59n2_Jun2014_cover.inddjudgments, and legal convictions.

Robert Faulkner’s Corporate Wrongdoing and the Art of the Accusation rectifies these omissions. It focuses on accusations of wrongdoing that are voiced by buyers and suppliers, business partners and competitors, and governmental and non-governmental watchdogs and that are amplified by media organizations and others. Accusations are “between” private complaints and semi-public rumors, on the one hand, and official investigations, indictments, and convictions, on the other. Their intermediate status is reflected in the degree to which they are public and the extent to which they are adjudicated by officially constituted social control agents. As such, accusations, Faulkner contends, are “red flags” and “signs that something is wrong,” by which he means that organizational relationships have broken down and formal social control reactions are on the horizon.

Click here to read the review of Robert R. Faulker’s “Corporate Wrongdoing and the Art of Accusation” from Administrative Science Quarterly. Don’t forget to sign up for e-alerts and get notified of all the latest research and book reviews from Administrative Science Quarterly!