business ethics unit VIII PowerPoint Presentation

Toward an Ethical Theory of Organizing

Naveed Yazdani • Hasan S. Murad

Received: 30 March 2013 / Accepted: 4 January 2014 / Published online: 18 January 2014

� Springer Science+Business Media Dordrecht 2014

Abstract Current organizations are underpinned by util-

itarian ethics of Modernity. Pure economic motive driven

organizations detach themselves from larger societal

interest. Rising number of corporate scandals and intraor-

ganizational income inequalities are breeding similar

trends in society at large. Current organizations base their

competitive advantage on resources and capabilities which

boils down to economic supremacy at all cost whether it is

named I/O or RBV of the firm. This theoretical article

posits Ethics-based Trust as the main competency and

capability for attaining sustained competitive advantage. It

in no way condemns utility view of the firms but treats it as

a natural yet secondary outcome of genuine ethicality of

the firm. Cultivating an ethical culture in the firm through

identifying antecedents, organizational practices, and the

outcomes where profitability is an automatic but secondary

outcome under the supremacy of ethics is detailed in the

multilevel model presented in this article. The main call of

this article is to posit ethics and morality over and above

short-term profits so that organizations fulfill their trustee

role for society through enacting socio-humanistic theories

within organizations. A brief analysis of the proposed

ethical theory of firm is undertaken in light of the

‘‘schooling’’ notion in the contemporary organization the-

ory literature.

Keywords Business ethics � Theory of firm � Quantum organizations � Trust-dependence view of firm � Transformative learning � Ethical leadership � Organization theory schools

Introduction

The Modernist organization theory discourse rests on the

assumption that theories are constructed by deploying

scientific methods entailing data collection and empirical

testing (English 2001). Theories are thought of as broad

general laws with little regard for contextuality and local-

ness (Lincoln and Guba 1985, p. 82). They are considered

to be formulated by adhering to laws of parsimony and

reductionism (Pfeffer 1993; Murphy 1999). Majority of the

main stream contemporary research scholarship continue to

evaluate theories on the basis of empirical framework

assessing relationship between observable units or vari-

ables and approximated units or constructs (Bacharach

1989; Cohen 1980). However, for the last four to five

decades, an increasing number of scholarships acknowl-

edges the need for crafting theories provoking ‘‘socio-

humanistic responsibility’’ in organizations (Ericson 1970)

which facilitate them to transcend Modernist utilitarian

values. This acknowledgement is underpinned by a general

feeling that ‘‘organization theory is in danger of becoming

isolated and irrelevant to leading the emergence of new

paradigms’’ (Daft and Lewin 1993) having the capacity to

challenge the traditional organization theory discourse. To

alleviate these concerns an ‘‘open ended’’ paradigm (Kuhn

1996, p. 10) or theory of firm targeting the very core of

organizational decisions and actions needs to be developed.

This need has not gone unnoticed and studies identify

corporate ethics ‘‘as a fundamental construct’’ and core

N. Yazdani (&) School of Professional Advancement, University of Management

and Technology Lahore, Lahore, Pakistan

e-mail: [email protected]

H. S. Murad

Rector, University of Management and Technology Lahore,

Lahore, Pakistan

e-mail: [email protected]

123

J Bus Ethics (2015) 127:399–417

DOI 10.1007/s10551-014-2049-3

organizational values guiding a firm through various ethi-

cal dilemma situations (Trevino et al. 1998; Valentine and

Barnett 2002). Recent scholarship notes that corporate

moral deficiencies have had two major impacts on business

world in particular and society in general: rising number of

corporate scandals (Enron type) and growing intraorgani-

zational pay inequalities.

The above-mentioned societal impact of organizations

gains new heights in the light of empirical evidence which

shows that 51 of the largest 100 economies of the world are

business organizations, the combined annual sales of top 200

companies is $7.1 trillion (more than the combined GDPs of

182 countries), and that 4.5 billion people in the world

account for less than $4 trillion of economic activity

(McAuley et al. 2007, p. 447; Krippner 2011). The economic

superiority of large corporations is coupled with the legal

immunity which they enjoy. The American Communication

Decency Act (CDA) 1996, for example, provides total

immunity for mega service providers such as Google,

Facebook, Twitter, and Skype from being sued. According to

PEW report (February 2010) 73 % of wired American

teenagers use these social networking websites, and their

parents can do nothing to stop a third party from posting any

content about their children (Jacques 2010, pp. 50, 116, 118).

These observations have spurred an upsurge in scrutinizing

corporate ethics. This examination has, however, mostly

focused on the relationship between corporate ethics and

financial performance of organizations (Waddock and

Graves 1997) implying that the sole objective of organiza-

tions is increased profitability. The ‘‘rationalistic stance’’

toward ethics assumes that most of the financial and

inequality problems can be blamed to a few ‘‘bad’’ or ‘‘rule-

breaking actors’’ while majority follows the normative eth-

ical standards and legal norms (Trevino and Weaver 1994).

Other scholars also note that in spite of ‘‘recent high-

profile corporate scandals involving prominent (and) high-

performing firms’’ (Mishina et al. 2010), it is generally

believed that unethical organizational behavior is attribut-

able to individual ‘‘bad apples’’ (Hannah et al. 2011). It is

also theorized that ‘‘love of money is directly or indirectly

related to propensity to engage in unethical behavior’’

(Tang and Chen 2008). Business schools and the education

they provide are crucial in inducing ethical or unethical

behavior in individuals. It is well known that business

education is not only a big business but is more commer-

cialized than any other form of education (Pfeffer and Fong

2002). Most of the business students have more love for

money and enter the field to make money (McCabe et al.

2006; Cunningham et al. 2004; Tang and Chiu 2003).

Research also seems to indicate that ‘‘bottom-line men-

tality’’ is the core cause of ethical crises rampant in the

contemporary business world (Kochan 2002; Sims 1992,

p. 508; De Cremer et al. 2011).

The prime thesis of this article is to provide an ethical

theory of organizing which is grounded in the contempo-

rary schools of thought of organization theory while also

borrowing from the fields of philosophy, education, orga-

nizational trust, and religion. An ethical theory of orga-

nizing in the sense of morality is needed because the

relationship between organizations and society is a kind of

trustee relation (Simon 1995). Organizations need to tran-

scend beyond self-interest-serving stakeholders’ utilitarian

view and be prepared to include not only customers but

also people at large as beneficiaries of their products,

processes, and services. This is different from the legal

obligation stance of contemporary initiatives like corporate

social responsibility and encompasses efficiency, effec-

tiveness, sustainability, and organizational justice not only

within but also outside the organizational boundaries. The

multilevel model of organizational ethics presented in the

article sketching the antecedents and outcomes of the

theory is expected to arouse and stimulate interest of

contemporary scholars to undertake further research in this

developing paradigm.

This article has seven sections. ‘‘Literature Review’’

section surveys the literature on ethics, business ethics,

theory of firm, schooling in organization theory, organi-

zational trust, and transformative learning. ‘‘Research

Methodology’’ section briefly describes the research

methodology employed for this study while ‘‘Multilevel

Model for Ethical Theory of Organizing’’ section presents

the multilevel model embedding ethical theory of orga-

nizing. Based on the previous two sections, Discussion is

undertaken in ‘‘Discussion’’ section while ‘‘Ethical Theory

of Organizing and Schooling in Organization Theory: A

Brief Analysis???’’ section briefly analyzes the proposed

ethical paradigm of organizing in light of ‘‘schooling’’

notion of organization theory literature. ‘‘Main Conclu-

sions’’ section presents the main conclusions of the article.

‘‘Future Directions’’ section describes the future directions

of research on ethical theory of organizing.

Literature Review

Ethics

Over the last two centuries, ethical debate has contrasted

two general frameworks: one resting on duties (deonto-

logical view), and the other on goals and objectives (the

teleological view). For the last few decades, axiological

perspectives are also added to this debate. Axiology of

ethics ponder over questions like ‘‘what should one value?’’

A shift in the meanings of ethics from duties or work

objectives toward values which form the core and whole of

a person and an organization is therefore, evident from the

400 N. Yazdani, H. S. Murad

123

literature on ethics (Brady and Hart 2007). This shift is

particularly important in the face of research on business

ethics which mainly treats ethics as yet another empirical

construct to be linked with firm’s profitability (Waddock

and Graves 1997; Chun et al. 2011). This practice is in

variance with research findings indicating that ethicality is

embedded in human nature and that individuals ‘‘are not

only opportunistic in their economic pursuits’’ (Ghoshal

2005).

Ethical theories are classified as five ethical frameworks

(Moore and Bruder 2001, p. 214; Trevino and Brown 2004;

Shaw and Barry 1992, pp. 60–69). Divine-command ethics

draw what is right and wrong from Divine Decrees as

defined by Scriptures and Dogmas. Consequentialism looks

at consequences of an action or thought and ensures to

make that ethical which has the most desirable and favor-

able consequences. Deontological ethics declare moral

duties as ethics. Virtue or Excellence ethics are about fol-

lowing deeds and acts which are virtuous, just, compas-

sion-based, and call for caring of others (Durant 2006,

p. 97; Arjoon 2000; Takala 1998). Relativism, subjectivism

or moral relativism (Ojeili 2002) elevates culture and

society as the supreme authority in deciding what’s right

and wrong. These perspective views morality as a purely

personal decision (Pojman 2002, p. 16).

Table 1 presents major ethical thought development in

chronological order over a period spanning well over

2000 years.

A brief description of Table 1 follows below.

Confucianism placed family, ancestors, and filial obe-

dience at the beacon of ethicality. Taking willing care of

the elderly, being kind, peaceful, thrifty, and industrious

and bearing abhorrence to warriors and competition are

also the core values of Confucianism (Durant 1935,

pp. 788–795, 860–975, 922, 923). The whole idea of

Confucianism revolves around the notion of ‘‘moral worth’’

which is based on virtue ethics and benevolence (Chan

2008). Confucius believed morality to be based on Tao (the

natural Way to a destination), Ren (the highest good

achieved through morality and humanistic love), and I or

justice and righteousness (Watson 2005, pp. 162, 163).

Confucianism advocates moral-ordering of the self of the

rulers for achieving the highest form of governance (Du-

rant 1935, p. 668) through ‘‘five constant virtues’’ of

humanity, righteousness, propriety, wisdom, and faithful-

ness (Ambler et al. 2009, p. 75).

Aristotle’s virtue ethics cannot be seen as hindering

commercial activities even in the present context. He

advocated productive business but condemned the lust and

greed of craftsmen to earn as the only objective of work.

Table 1 Major ethical thought development in chronological order

Ethical philosopher Era Major ethical stance Most influential works

Confucius Axial age a

Deontological and virtue ethics Analects (compiled by neo-confucionist)

Plato Axial age Divine-command virtue ethics Republic parmenides

Aristotle Axial age Virtue ethics The Nichomachean ethics politics

St. Augustine Axial age Divine-command ethics Confessions the city of god

Prophet Muhammad (PBUH) b

Axial age Divine-command ethics Revealed scripture

Niccolo Machiavelli 1469–1527 Consequentialist utilitarian ethics The prince

Thomas Hobbes 1588–1679 Aristotelian virtue ethics based on materialism Leviathan

Immanuel Kant 1724–1804 Deontological ethics Foundations of the metaphysics of morals

Jeremy Bentham 1748–1832 Consequentialist utilitarian ethics Introduction to the principles of morals

and legislation utilitarianism

John Stuart Mill 1806–1873 Consequentialist utilitarian ethics On liberty

Friedrich Nietzsche 1844–1900 Master and slave morals

(Consequentialist and utilitarian ethics)

Beyond good and evil thus spoke zarathustra

G.E. Moore 1873–1958 Metaethics Principia ethica

W.D. Ross 1877–1970 Kantian deontological ethics The right and the good

John Rawls 1921–2002 Deontological ethics A theory of justice

Alasdair Macintyre 1929 Aristotelian virtue ethics After virtue dependent rational animal

a The time period covering 600 years before and after Common Era (Tamney and Chiang 2002, pp. 8–9)

b According to Islamic view all the Prophets conveyed nearly the same Divine Message of morality. Prophet Muhammad (PBUH) is included in

this list because Divine Ordinations revealed to him (Holy Quran) and his divinely inspired traditions and ways (Sunnah) are preserved in

entirety and in their original form till today (Bucaille 2003). Many ethicists (for example De George 1994) include Divine sources Ten

Commandments (Exodus 20: 1–17) and Deuteronomy (5: 7–21) as basis of religious branch of business ethics

Toward an Ethical Theory of Organizing 401

123

His idea of ethicality was not to pursue ‘‘lower goods’’

(material) at the cost of ‘‘higher goods’’ (virtues-based

character) (Worden 2009a, b). He differed from Plato’s

idea of universal good and believed that good and bad

could be differentiated objectively without relying on the

divine-commands of gods. This idea was central to his

notion of ‘‘golden mean’’ whereby virtues are thought of as

avoiding extremes and is heterogeneous and not statically

homogenous and godly as advocated by Plato (Wijnberg

2000; Bertland 2009). His ethics of politics were concerned

with cities and not commercial organizations but contem-

porary theorists (Pfeffer 1992) tend not to separate large

organizations’’ political ethics from that of politics of

governments. Aristotle expounds 13 moral virtues of which

self-control, courage, generosity, sociability, and justice

are particularly relevant with business practices. According

to him, these moral virtues of ‘‘good life’’ are at the bases

of personal, business, and universal happiness (Bragues

2006).

St. Augustine’s theological discourse on ethics provides

a link with Aristotelian ethics by preferring the intangible

goods or virtues over material goods or desires (Worden

2009a, b). He mixed religion with Platonic philosophy and

provided Christianity its philosophical breadth and depth.

However, unlike Plato, he was influenced by Christian

Scriptures and believed in eternal law of God in the sense

that it was inscribed in human nature to be good. Like

Aristotle, he rejected love of money and material as an end

and equated happiness not just with materiality but refusing

evil in its acquisition. And evil according to Augustine was

turning away from God (Moore and Bruder 2001,

pp. 224–227).

Western Dark Ages witnessed little progress of ethical

thought in the West. But it was Prophet Muhammad

(PBUH) who reformed the ethical system through divinely

inspired revelations during seventh century in the Arabian

Peninsula. The core of ‘‘Islamic Work Ethic’’ (IWE) is

emphasis on intentionality and not consequences (Ali and

Al-Owaihan 2008). The governance system of PBUH was

interwoven and inseparable from the Divine-Commands.

Divine Law formed the backbone of whole spectrum of

human actions, and all what man does is found in the

teachings and injunctions of the Law (Nasr 1987). The gist

of Islamic ethics include complete submission to the Sov-

ereign in all matters of life, justice, equity, compassion,

humbleness, emancipation of the suppressed, repelling evil

with good, avoiding arrogance, greed and lust, generosity,

self-restraint, patience, and avoiding over spending and

luxuries (Armstrong 2002, p. 5; Watson 2005, p. 354;

Donzel 1994, p. 94).

About seven centuries after Aristotle, Niccolo Machia-

velli wrote The Prince, a classic treatise on educating

others on how to gain and retain power and control and

exploiting without much regard to traditional virtues of

trust, decency, compassion, and honor (Wilson et al. 1996).

This was a major departure from Aristotle’s virtue ethics.

Machiavellianism or manipulative and over-competitive-

ness is a standard attitude in contemporary corporate world.

Machiavelli’s ethics are contrastingly different from ethi-

cists of Axial age. He believed in acquiring power as an

end no matter what means are deployed to achieve it.

Deception, manipulation, and exploitation are some of the

means which he advised to gain power and control (Tang

and Chen 2008).

Hobbes’s ethics of promoting self-interest are based on

materialism without much regard to absolute standards or

virtues. Kantian ethics are, however, based on ‘‘categorical

imperatives’’ appealing rationality to decide what is good

and right as if it was a universal law. His ethics demand to

answer the call of duty. Jeremy Bentham and John Stuart

Mill had a result-oriented notion of ethicality. Their utili-

tarian stance is that ‘‘rightness of an action is identical with

the happiness 1

it produces as its consequences’’ (Moore

and Bruder 2001, pp. 233–240). The above-mentioned

Consequentialist and utilitarian and Nietzschean ethics of

power, strength, and competitiveness are at the heart of

economics orientation of organization theory. Nietzsche’s

ethical theory rests on the assumption that bad is weak, and

good is powerful and strong. He seems to be influenced by

Machiavelli’s ethical paradigm of deception and exploita-

tion (Worden 2009a, b). Under these ethical influences the

traditional Protestant Work Ethics, centered on hard work

and thrift (Seidman 2004), gave way to Western Social

Ethic (WSE) which legitimize societal pressure on indi-

viduals to conform to the pressure of society (Whyte 1956,

pp. 4–22). The current consumer is caught between his own

economic and moral situation and the demands imposed on

him by the ruthless consumerist society.

Many accuse Alasdair Macintyre as ‘‘anti-business’’ and

impractical. After Bertrand Russell’s dismissal of Aris-

totle’s virtue ethics in early twentieth century (Russell

1945, chap. XX), Macintyre revived them in later years.

Macintyre is not against business per se but opposes a

certain type of business which is immersed in materiality

and is devoid of higher virtues (Dobson 2009). He identi-

fies three ‘‘unethical’’ features of contemporary economic

order: individualism, competitiveness, and exaltation of

market over social forces (Macintyre 1984, p. 254). These

practices, according to Macintyre, render the contemporary

corporate practices unethical, non-cosmic, and myopic

with little ability to think beyond personal interest and

1 Happiness of utilitarian philosophy is, however, very difficult to

distinguish from physical pleasure, comforts, and luxuries. Bentham

was the first post-enlightenment utilitarian to take happiness as right

rather than treating right as means to happiness (Worden 2009a, b).

402 N. Yazdani, H. S. Murad

123

profitability. His notion of ‘‘internal good’’ is a direct

extension of Aristotelian ethics which envisage all human

activities aiming at some ‘‘good’’.

Strands of Business Ethics

The roots of business ethics lie in philosophy. However,

the literature is divided over this matter. Some of the

scholars’ ground business ethics in social sciences while

others look at this stance with suspicion and claim that

social science (especially economics) grounding of busi-

ness ethics is responsible for their decadence. They argue

that ethics cannot be ‘‘extracted from data’’ as is the case

with other empirical social science constructs, and that

ethics and the methodology of social sciences are simply

incompatible (Worden 2009a, b).

Figure 1 depicts different strands of contemporary

business ethics.

Figure 1 traces the genealogy of business ethics. Ethics

in business and commercial world are largely drawn from

secular and religious philosophies. The detail has already

been discussed in the chronology of ethical thought

development above. Business ethics as an academic field

exhibits the paradoxical treatment of ethics as rooted in

philosophy but applied, practiced, and taught by social

science methodologies. The application of ethics in busi-

ness is manifested generally through individual organiza-

tional practices and specific initiatives like CSR (De

George 1994; Wines 2008).

Are Ethics Relevant to Business?

The ethical frameworks discussed above can be reduced to

two broad categories: consequences-based utilitarian

(including professional duty and relativistic approach) and

virtue ethics (Divine-Commands and/or based on striving

for ‘‘good’’). Kantian categorical imperatives are concep-

tually closer to virtue ethics while professionalism inclined

ethicality is rooted in the Modernist philosophy of result-

orientation and utility of a certain action, thought, or

behavior. This view is consistent with Whetstone’s (2001)

tripartite approach toward applying ethics in business

where ethics are applied as mix of Consequentialist (tele-

ological), deontological (rationalist), and virtue (personal

character-based values) ethics. The question to ponder is:

in the face of corporate profit maximization orientation,

global consumerist culture and unleashed capitalism, is

there any place for virtue ethics in business?

As Bertland (2009) notes virtue ethics have always been

a part of business ethics discourse but have not emerged as

a fully integrated theory. This is largely because virtue

ethics are perceived as emanating from religion and not

secular, amoral, and ahistoric organization theory discourse

and are, therefore, cut-off from the mainstream manage-

ment theorizing.

Unethical behavior in organizations is attributed to

many organizational factors such as leadership, culture,

and individual predispositions (Hannah et al. 2011). The

literature also establishes that ethical and moral behavior is

desired for bolstering organizational financial performance

(Mayer et al. 2012) and not for inculcating morality in

individuals. For many, deception is more or less an

accepted norm in business (Carr 2002, p. 359). Scholars

even find it difficult to support that good ethics results in

good business and bad ethics in bad business (Burton and

Goldsby 2009). It is to be noted that what is implied by

‘‘good ethics’’ is mostly rules and legal compliance of firms

and not the notion of good in the sense of virtue ethics

(Wines 2008). But rising corporate scandals, income

inequalities within and outside organizations, failure of

business education and organizations to nurture the stu-

dents and employees as ‘‘wholistic’’ human beings,

Business Ethics

Ethics-in-business strand Business ethics academic field Adoption of Ethics in business

Secular Religious Philosophical Social Scientific Business CSR Practices

-Normative -Descriptive

-Critical -Empirical

Fig. 1 Different strands of contemporary business ethics

Toward an Ethical Theory of Organizing 403

123

disregard of normative approaches to ethics (De Cremer

et al. 2011; Trevino and Weaver 1994) and too much focus

on profit and financial gains by the firms not only make

ethics relevant but also a viable alternative to formulate

management theories.

Theory of Firm

The purpose of any theory of firm or paradigm of orga-

nizing is to result in ‘‘institutions created to serve human

needs….to provide meaningful experiences’’ and not just profits and financial gains for immediate shareholders

2

(Roberts 2004, p. 18). The ‘‘double hermeneutic’’ principle

of social sciences implies that theoretical assumptions

without taking into account their societal and practical

implications can make the wrong look right and the right

look wrong (Keynes 1964, pp. 383, 384; Pfeffer 2005).

Currently, there are five dominant theories of firm or

schools of thoughts in organization theory. McKinely et al.

(1999) define theory of firm ‘‘as an integrated theoretical

framework that provides a distinctive viewpoint on orga-

nizations and that is associated with an active stream of

empirical research’’. Not unlike the scientific paradigms

(Kuhn 1996), theories of firm emerge when a dominant

way of organizing and managing undergoes a period of

crisis in which empirical anomalies accumulate and the

pattern of managing shifts to a new better unified and

coherent theory or paradigm. In short, organization theory

paradigms, much like scientific paradigms, are novel yet

continuous with existing research practices and body of

knowledge. The key difference between organization the-

ory and Kuhn’s scientific paradigms will be dilated upon

later in the next sub-section.

All dominant paradigms of organization theory

(resource-dependence, population ecology, institutional-

ism, agency theory, and transaction cost theory) resulted

from scientific and philosophic revolutions led by Newton,

Descartes, and Leibniz in the seventeenth century. The

resulting dichotomy and compartmentalization of knowl-

edge led the Western mind to believe that man, through

science, had the capacity to conquer nature. Thus, the

Natural Science world view ossified to the extent that it

easily founded its application in the fields pertaining to

leading, motivating, managing, and organizing human

beings (Stacy 2007, pp. 28, 29, 186, 187). During nine-

teenth century, Charles Darwin’s theory of evolution jus-

tified the grounds for individualism in management by

providing ‘‘scientific credibility’’ to the Nietzschean

philosophical stance of ‘‘survival of the fittest and the

strongest’’ (Nietzsche 2007, p. 201; Gimeno et al. 1997;

Morgan 1998, p. 57).

Kilmann (2001) terms this Natural Science Modernist

version of organizational knowledge as Cartesian/Newto-

nian or old paradigm (p. 19). In other words, this paradigm

of objectivity when applied to social sciences treats human

subjects as cold and inert objects. The scientific and

philosophic objectivity of Newton and Descartes is un-

derpinned by the ideas about time and space of two ancient

greats: Aristotle and Euclid. For the last about twenty-five

centuries, their ideas that space is flat and empty have

nearly gone unchallenged (p. 33).

Kilmann’s quantum/relativistic or new paradigm of

management is underpinned by Albert Einstein’s theories

of special and general relativity. These theories challenge

the Aristotelian, Euclidean, and Newtonian assumptions of

a flat and empty space. The theory of general relativity is

based on non-Euclidean or Riemannian idea of space

which suggests that space is curved or ‘‘warped’’ (Hawking

1996, p. 40). This insight led Einstein to believe that the

space was not ‘‘empty’’ but composed of a dark invisible

matter (Mook and Vargish 1987) which was thought to be

composed of infinitesimal particles or strings or super-

strings which spin, rotate, and vibrate. It was because of

these superstrings that space was not flat but ‘‘curved’’ for

objects traveling at or above the speed of light. Breaking

and joining of these elementary superstrings could explain

the creation and interconversion of matter and energy

(McMahon 2009, pp. 2–10).

Kilmann connects these insights of Physics to the world

of organizations. According to him the old organizational

paradigm based on Newtonian science treats people as inert

objects not much different from atoms and molecules.

However, unlike inert particles people have their own

individual subjectivities and it is impossible to ‘‘predict’’

their perceptions and behaviors. The new science paves

way for ‘‘quantum organizations’’ where organizational

members previously trained to behave like inert objects

’can develop self-aware consciousness and thus become

fully functioning ‘‘self-motion monads’’’ (pp. 48–52). The

quantum organizations are supposed to have flatter struc-

tures and horizontal hierarchies, participative decision

making, spirit of cooperation among employees, decen-

tralization and empowerment, mutual trust, and team spirit.

Kilmann also names these organizations as empowered,

organic-adaptive, network, horizontal, knowledge-creating,

and learning organizations (p. 69). Others (Aldrich 1999,

for example) have also questioned the possibility of orga-

nizations having a generalized and universal theory.

The above discussion reveals that organization theory

paradigms are underpinned by scientific and philosophic

assumptions and that major change in scientific/

2 We would rather exclude consumers and customers as being

immediate stakeholders. They are stakeholders because transacting

with them brings financial gains to the shareholders or immediate

stakeholders.

404 N. Yazdani, H. S. Murad

123

philosophic paradigms lead to changes in organization

theory paradigms. As mentioned earlier, the commonality

among different Modernist organization theory paradigms

is that they define organizational purpose of existence only

in financial viability terms and profit maximization (Con-

ner 1991; Davis and Marquis 2005). It can be inferred that

Modernist organization theory paradigms not only share

the Cartesian/Newtonian base but also utility and profit

maximization objective. These paradigms have purged

morality, history, contextuality, and localness from orga-

nization theory and probably explain why current man-

agement theories are considered to be in crisis (Argandona

2007). 3

The new Quantum paradigm which is based on

non-dualist or monoist assumptions, however, treats human

beings differently. It can further be inferred that ethical and

philosophical assumptions of this paradigm would also be

different. That serves as the main driver of this article for

proposing a multilevel ethical theory for managing orga-

nizations. Divorcing Modernist dualism from management

theories would demand that organizational culture and

climate are based on mutual trust and that trusting others be

induced in organizational members like other behavioral

skills. But before moving to the issue of organizational

trust a brief account of schooling in organization theory (a

closely related notion with theory of firm idea) is

undertaken.

Schools in Organization Theory

McKinley et al. (1999) produced seminal work on

‘‘schooling’’ in organization theory. We present a summary

of their work here because it forms basis for analyzing the

proposed ethical theory of firm in a later section of this

article.

McKinley et al. point out that organization theory is

multischool and combines differing and conflicting yet

overlapping perspectives. This is in contrast to Kuhn’s idea

of paradigm as defined in the context of natural sciences.

The preparadigmatic nature of organization theory is

understandable because its foundational disciplines eco-

nomics, sociology, and psychology also lack natural sci-

ence like firm paradigms.

Commonly acknowledged schools of organization the-

ory (transaction cost, population ecology, neoinstitution-

alism, resource dependence, contingency, and agency

theory) share six dimensions or attributes. Novelty and

continuity have inherent tensions between them but to be

an organization theory school, the theory has to present a

novel idea which is well grounded in the current body of

knowledge. McKinley et al. provide the examples of

population ecology and neoinstitutional theory to illustrate

this point. Population ecology is a novel perspective in

organization theory but well recognized in the fields of

Hawley’s ecology models and Darwinian biology. Simi-

larly neoinstitutionalism of organization theory is based on

well developed and researched sociological perspective of

isomorphic societal forces. They also give the example of

postmodern organization theories which are novel but not

continuous with existing body of knowledge. They attri-

bute the comparatively less ‘‘forcefulness’’ of postmod-

ernism in organization theory to this lack of continuity in

spite of its novelty. Simultaneous presence of novelty and

continuity, therefore, constitute two basic attributes of a

theory or school in organization theory.

The third dimension of an organization theory school is

its scope which in simple words translates as ‘‘breadth of

ambiguity’’. The more the scope or ambiguity a school

exhibits the more the chances that the school will catch

scholarly attention to generate a consistent stream of

research. This ability to generate future research forms the

fourth attribute of an organization theory school. The fifth

attribute of a school is its ability to create enactment or

chances of reification and setting in motion what McKinley

et al. describe as ‘‘self-reinforcing sociocognitive dynam-

ics’’. It is the sequence of novelty, continuity, scope, ability

to generate future research, and enactment which enable a

developing school to gain intellectual and scholarly legit-

imacy, the sixth dimension of an organization theory

school.

The idea of schooling in organization theory is consis-

tent with Mintzberg’s (1990) similar notions in the field of

strategic management and systems, cybernetic, and com-

plexity perspectives (Senge 1994; Stacy 2007) of organi-

zation theory. These similarities will be clarified later in the

Analysis section of this article.

Organizational Trust

According to Argandona (2007) virtue ethics are a basic

requirement for building trustworthy and fully satisfactory

relationship with other people. This insight connects

organizational ethics with organizational trust.

Trust is crucial in attaining completion of tasks suc-

cessfully in organizations (Colquitt et al. 2011). Trust-

worthiness of others is considered an antecedent to trust.

Trust is an individual’s inclination to take risk by consid-

ering someone trustworthy (Mayer et al. 1995). It is a kind

of ‘‘probability’’ (McKnight et al. 1998) that a person is

trustworthy and can be trusted for personal or professional

purposes.

Caldwell et al. (2009) base their model of trust on

Theory of Reasoned Action. The theory defines trust as a

behavior which is preceded by intentions which in turn are

3 Argandona calls the economics-driven modernist organization

theories as culturally impoverished and anthropologically restrictive.

Toward an Ethical Theory of Organizing 405

123

based on beliefs and attitudes of an individual. Trust thus

becomes belief-based intentions to believe in the trust-

worthiness of someone. Organizational trust is difficult to

separate from the above-mentioned definition of trust, and

it is equally difficult to nurture it in every organizational

context because it requires a more involving and partici-

patory culture (Schoorman et al. 1996). Research confirms

that trust promotes organizational success by increasing

employee commitment and motivation along with

enhancing customer satisfaction. Trust is also positively

related with better interorganizational relations, knowledge

transfer, innovations, and is thought to create competitive

advantage for the firms (Pirson and Malhotra 2011).

Considering that current theories of firm are based on

Modernist dualist assumptions, it is hard to imagine that

trust and trustworthiness would be commonplace in orga-

nizations. An ethical theory of firm encompassing virtue

ethics along with utility and professional-duty ethics would

be more productive in nurturing intra and interorganiza-

tional trust among stakeholders and in reaping long-term

financial and nonfinancial fruits for individuals and society.

Inculcating trusting behavior in employees, therefore, calls

for exposing them to a nontraditional learning style.

Transformative Learning

Recent research on American university students confirm

that higher education institutions produce career-oriented

professionals who are not exposed to high questions about

self (Bloom 1987), existence, life, and society during the

course of their studies. As a result, they are not prepared

and trained to bring about any major value-based change

and transformation in the society (Pfeffer et al. 2009). It is

well known that business schools graduates take result-

oriented utility ethics as a given fact of life and most of the

ethics courses in universities do not consider ethical issues

to be beyond compliance to legalities (Wines 2008).

Research on business school students shows that a vast

majority perceive business education as performance rather

than self-mastery focused and that the former category is

much more liable to engage in unethical behavior than the

later (De Cremer et al. 2011).

Transformative learning is a recognized domain in the

area of adult education. Many studies conducted in the

Western context confirm that it is applicable and suitable

model of education for adults. Transformative learning

fosters critical reflection abilities in individuals which lead

to transformation of worldviews of self, groups, and ulti-

mately societies. Role of adult educators and senior man-

agers in fostering transformative learning is therefore, of

prime importance. Transformative learning is not an

instructional tool which is transferred through traditional

educational, learning, training, and teaching styles. In order

to initiate transformation of individuals the transformative

learning imparters have to be transformative learners

themselves possessing the abilities to reflect critically on

their recent teaching, training, and learning experiences

leading to transformation of their own meaning perspec-

tives and meaning schemes.

As a theoretical framework, transformative learning is

practiced in educating adults in both higher education and

corporate organizations. Both forms of learning share the

basic premise that idea generation and insights occur at

individual level. Organizational learning, however, needs

to be institutionalized and embedded in organizational

routines to be labeled as knowledge. Unlike theories of

knowledge management and intellectual capital, link

between cognition and action remains intact in transfor-

mative organizational learning (Crossan et al. 1995; Senge

1994; March 1991). Organizational transformation is

sought when current business models become irrelevant

because transformative learning generates more inclusive

and permeable personal mental models (Mezirow 1994).

Before understanding what transformative learning or

education is, it would be worthwhile to consider what it is

not. It is not what Freire (1970) describes as the ‘‘banking

concept’’ of education where the teacher or trainer is

assumed to be an expert and full of knowledge whereas

students and trainees are empty vessels filled by the

authoritarian experts (pp. 58–60). This nontransformative

teaching/learning style is ‘‘based on a mechanistic, static,

naturalistic, spatialized view of consciousness (and) it

transforms students into (mere) receiving objects’’ (p. 64).

Frier’s notion of problem-posing education employed

through dialogic transforms the teacher–students interac-

tion into learner–learner interaction where both learn and

are taught by one another. The dialogic method of educa-

tion is what Frier terms as the ‘‘pedagogy of the oppres-

sed’’. The most compelling attributes needed for an

educator and trainer to be involved in dialog with students

is compassion and caring and helping attitude. Frier’s

reflection–action–reflection….praxis is also at heart of Mezirow’s transformative learning theory. The two ele-

ments of reflection and action are intertwined to the extent

that sacrificing one of them either leads to empty verbalism

or mere activism (pp. 67, 76–79).

For the last four decades, Mezirow’s theory of trans-

formative learning has been a major subject of research in

the area of adult education. His theory draws from multiple

disciplines of ‘‘cognitive psychology, psychotherapy,

sociology, and philosophy’’. He defines transformative

learning as ‘‘the process of effecting change in a frame of

reference (Mezirow 1994, 1996) or as ‘‘learning that

transforms problematic frame of reference—sets of fixed

assumptions (inculcated through education and pressure to

conform to dominant organizational and societal norms)

406 N. Yazdani, H. S. Murad

123

and expectation (habits of mind, meaning perspectives,

mindsets)—to make them more inclusive, discriminating,

open, reflective, and emotionally able to change’’ (Mezi-

row 2003).

Mezirow (1996) conceptualizes adult learning as

occurring in three perspectives what he terms as ‘‘learning

paradigms’’. Each of the three paradigms is based on dif-

ferent assumptions about reality, education, and learning.

The resulting cognitive systems and learning and education

behaviors are, therefore, different under their influences.

The objectivist positivistic paradigm of learning is an

outcome of the Western rational tradition. According to

this tradition, reality exists independently, knowledge is

objective, knowledge standards are fixed, and language

merely acts as a conduit of conveying knowledge (Mezi-

row 1996). The validity of this type of knowledge is

established through empirical data analysis and hypothesis

testing. This type of learning which Habermas described as

instrumental learning is concerned with controlling and

manipulating environment, improving prediction and per-

formance, assessment of truth claims, and formal subject-

wise education. Its underlying logic and rational is hypo-

thetical-deductive while its methodology is strictly posi-

tivistic and empirical (Mezirow 2003).

The interpretist paradigm, based on the critique of

Nietzsche, Heidegger, Foucault, Baudrillard, and Lyotard,

views reality as a social construction and exalts language as

constituent of knowledge (Mezirow 1996). Basing on the-

ories of Habermas, Mezirow (2003, 1994), labels this

learning as communicative process. It focuses on under-

standing what someone means when he/she communicates

with others and assesses beliefs of others not as truth

claims but by arriving at a tentative best judgment. It is

underpinned by analogic–abductive logic, and its inform-

ing methodology is that of qualitative research.

Transformative learning theory is based on the eman-

cipatory or holistic or whole person (Dirkx 2006) paradigm

of learning. This view holds learning as continues process

of interpreting recent experiences to construct new inter-

pretations which lead to future actions. Recent experiences

are reinterpreted through critically reflecting on them.

Critical reflection is believed to change fixed mental frame

of references. These references are in turn composed of

meaning perspectives (the durable mental habits) and

points of view or meaning scheme formed of beliefs, val-

ues, feelings, and attitudes (Mezirow 1996). Meaning

perspectives shape one’s perceptions in the form of three

broad categories or codes: sociolinguistic codes (social

norms), psychological codes (personality traits), and epi-

stemic codes (learning styles). Meaning scheme are the

outer manifestations of an inner meaning perspectives

(Mezirow 1994). According to Mezirow, a well developed

frame of reference is more inclusive, open to change,

critically reflective, discriminating, and merged with action

and experiences. Transformative learning involves chang-

ing both a manager’s or teacher’s own frame of references

(subjective reframing) and that of others (objective refra-

ming). Transformative learning is grounded in the eman-

cipatory paradigm and presents a dialectical synthesis of

both objectivistic and interpretist paradigms. It goes a step

beyond both and focuses primarily on ‘‘critically reflective

emancipatory critique’’ which frees the learner from cul-

turally distorted communication (Mezirow 1996) by ques-

tioning culturally ingrained beliefs and values. It is the

ability to reflect critically which lies at the heart of trans-

formative or emancipatory learning paradigm.

Reflection, in general, is ‘‘turning back’’ on experiences.

It does not involve assessment of what is being reflected.

When it does, it becomes critical reflection. Critical

reflection of assumptions and presupposition underpins the

transformative learning theory. These assumptions, which

may be ethical, political, economic, religious, psychologi-

cal, socio-cultural, scientific, organizational, educational,

linguistic or pertaining to any other field, construe frames

of references or beliefs and values on the basis of which

individual attitudes, behaviors, and personalities are

shaped.

Mezirow (1994) makes distinction between three kinds

of reflecting: content, process, and premise reflection.

Taking the educational problem solving context in view, he

explains that when finding out who are the best students in

a class, educators focus on content or on the evidences that

a group of students are the best in that class. 4

When they

reflect on the process of this problem they reflect whether

the evidence on which they based their decision to grade

the students as best in the class was enough and did it

actually capture the performance? Commonly, we reflect

on content and process of a problem and that is how we

transform our minds or meaning scheme or points of view

on day to day basis.

Reflecting on premise of a problem is, however, not

common. Given the above example, it would entail

reflecting on educators’ assumptions about gaging student

performance. They might ask themselves why students

should be evaluated in competitive manner. Why can’t

their learning be assessed in some other way? This type of

reflection transforms meaning perspectives or habits of

minds and results in transformative learning. According to

Mezirow (2003) premise reflection which leads to meaning

perspective transformation ‘‘may be the result of a major

event in one’s life or the accumulated result of related

transformations in meaning schemes’’.

4 The same scenario can be applied to organizational settings where

senior managers assume the role of teachers and employees that of

students.

Toward an Ethical Theory of Organizing 407

123

The following ‘‘Mind Maps’’ not only summarize the

above literature survey but also provide a theoretical

framework for developing ethical theory of the firm and

multilevel model for applying it.

The left upper quadrants of Figs. 2 and 3 present the

current state of organization theories and outcomes of

current management education. The right lower quadrants

of Fig. 3 portrays the expected outcome if transformative

education imparting style is applied, and the ethics courses/

trainings are based on a mix of result and virtue ethics

orientation. The same quadrant of Fig. 2 presents ethical

theory of firm underpinned by nondualistic assumptions

and a mixed ethics culture.

Next section will take a detailed account of the multi-

level organizational model based on right lower quadrants

of both the figures. The antecedents and outcomes of the

value-based model and theoretical framework will borrow

from the Divine and non-Divine-Command virtue, deon-

tological and utilitarian ethics, transformative and eman-

cipatory learning, and organizational trust. A brief

description of the research strategy employed to construct

the integrative model precedes the ‘‘Multilevel Model for

Ethical Theory of Organizing’’ and ‘‘Discussion’’ sections.

Research Methodology

Research scholars find it difficult to follow the simplistic

dichotomy of labeling a piece of research as either quanti-

tative or qualitative (Morgan and Smircich 1980). It is to

avoid this simplification that this article traces its research

methodology from the roots of social paradigms of corporate

life. It does so by borrowing from Burrell and Morgan’s

(1979) assumptions of epistemology, ontology, human nat-

ure, and methodology. By employing nonpositivistic epis-

temology and ontological stance of nominalism, this

research is tilted toward subjectivism. Since the model pre-

sented in this article assumes voluntary action from organi-

zational members, it uses ideographic as opposed to

nomothetic methodology, a hallmark of natural science

research. This is also consistent with nondualist quantum

view of organizations which considers human organizational

Transaction Costa

Institutionalism Population Ecology

Resource – Based Theory Agency Theory

Incompatible

Partially Integrated Ethical Theory of Firm

Fully Integrated Ethical Theory of Firm

Modernist Dualistic View

Quantum Monoist View

Theory of Firm

Utilitarian (Consequentialist)

Mix of Consequential & Virtue (Non-

Consequentialist)Ethics

Fig. 2 aAll theories/schools of organization theory based on

Modernist Dualist View are

labeled as Traditional Theories

of firms or Traditional Schools

in organization theory in this

paper

Economically Oriented Professionals (Ethically Unconsciousb)

Partially Wholistic Professionals (Partially Ethically Conscious)

Economically Oriented Societal Professionals

(Economically Conscious)

Fully Wholistic Organizational & Societal Professionals

(Fully Ethically Conscious)

Traditional

Transformative

Type of Business Education / Trainings

Utilitarian (Consequentialist)

Mix of Consequential & Virtue (Non-

Consequentialist)Ethics

Fig. 3 bEthically unconscious implies that students/employees

are mainly cognizant of

compliance to laws but not

concerned with virtue ethics of

high morality

408 N. Yazdani, H. S. Murad

123

agents as conscious individuals and not inert monads. As will

be seen later, this article does seek radical changes in current

organizational practices concerning ethicality. It supports

what Burrell and Morgan term as ‘‘sociology of radical

change’’ within organizational context against the current

Modernist, dualist, and economic tilt of firms through the

agency of virtues, morals, and ethics. Considering these

assumptions and the organizational/societal change agenda

of this research, it is cast in the mold of radical humanist/

interpretive stance in terms of sociological paradigm of

organizational analysis. The radical humanist slant of this

article is also attributed to the very nature of business ethics’

dichotomous difficulty, as highlighted by Worden (2009a, b),

of being rooted in philosophy but studied through empiri-

cist research methodologies prevalent in social sciences

(p. 12). 5

Taking Crotty’s discussion of research process into

account the epistemological stance of this article is Con-

structionism or constructing meaning from realities

through mind. Theoretical perspective of interpretivism is

utilized because social and organizational accounts are

interpreted by employing research methodology of ethical

discourse analysis covering a time span of well over two

millenniums. Because the research methodology men-

tioned above calls for tracing the development of ethical

thought over a long period of time, the method of choice

for this research is historical/comparative analysis (Crotty

1998, pp. 4–11, 63–65). Historical data are interpreted to

construct the model presented in the following section

which is later interpreted in the ‘‘Discussion’’ section.

Multilevel Model for Ethical Theory of Organizing

Based on the literature review undertaken in ‘‘Literature

Review’’ section, Fig. 4 presents the model proposed by

this article.

The following section discusses this model in some

detail.

Discussion

Given the rising corporate scandals and organizational led

societal inequalities, the need for ‘‘sociohumanistically

responsible’’ organization theories cannot be underesti-

mated. The Modernist dualist organization theory paradigm

and traditional business education churning out economi-

cally possessed professionals (pp. 3, 4) have, however,

reduced the issue of ethicality to a shadow comprising of

A Multilevel Model of Ethical Theory of Organizing

Ethical Climate Antecedent

• Organizational Trust Culture Ability Integrity Benevolence

• Consequential Ethics

• Virtue Ethics

• Transcendent Values Compassion Egalitarianism Justice

• Ethical Leadership

• Monist Quantum Organization Structure

Organizational Practices

• Ethical Trainings

• Transformational Learning / Emancipatory / Critical Thinking Methodology

• Performance Appraisal and Reward System linked with Ethicality

• Ethics Audit

Consequences

• Increased Moral Efficacy, Moral Identity, Moral Courage

• Increased OCB

• Increased Stakeholders’ Trust (Trust Dependence)

• Increased Organizational Legitimacy

• Increase Firm Reputation

• Increased Employee Retention

• Increased Customer Retention / Loyalty

Increased Firm Performance / Profitability

Fig. 4 Proposed model

5 Throughout the remaining sections of this article wherever a page

number appears in parenthesis without an authors’ name, it denotes

self-referencing.

Toward an Ethical Theory of Organizing 409

123

legality, a trend which seems to protect the benefits of

larger corporations (p. 3). If the only purpose of organi-

zational existence is continued to be perceived as profit-

ability, then this trend is hard to reverse through patchy

adoption of ethics in business through initiatives like CSR.

The model proposed above builds a theory of firm positing

ethicality at individual, departmental/team, and organiza-

tional level on the forefront without compromising on the

economic expectations of a firm and its stakeholders.

Model Antecedents

Scholarship on the ethical literature identifies five major

elements of an ethical business culture: values-driven,

stakeholder balance, leadership effectiveness, process

integrity, and long-term perspective (Ardichvili et al.

2009).

The multilevel organizational model of ethical theory of

organizing requires the meta-antecedent of national culture

for its support. This requirement makes this model flexible

and adoptable according to localness and contextuality.

Different national cultures would moderate ethical climate

nurturing in organizations in different ways by supporting

some of the antecedents of ethicality in organizations. For

example, both secular and nonsecular cultures would sup-

port organizational trust, ethical leadership, temperance,

justice, and self-transcendent value inculcation albeit in

their own ways. That differential will be discussed later.

The antecedents of building an ethical climate within an

organization are taken up first.

As already discussed, trust is defined as belief-based

intention to believe in the trustworthiness of others

(Caldwell et al. 2009). Mayer et al. (1995) identified three

core factors of perceived trustworthiness: ability, benevo-

lence, and integrity. Ability from the point of view of

Meyer et al. is heavily underpinned by task ability. This

model proposes to define ability beyond mere technical

mastery and includes ‘‘ethical competence’’ or known and

proven track of being ethical over a period of time. Senior

and experienced managers are obviously looked upon to

act as ethical leaders because of their ethical competence as

defined above. This is closely related with what Meyer

et al. define as benevolence which is a person’s inherent

ability to be good to others without expecting any material

rewards. If the trustee exhibits these two characteristics

over a period of time and is known for them, then his/her

integrity is established. In a later article with Schoorman

and Davis (2007), Meyer also adds the element of reci-

procity of trust which means that trust building is not

unidirectional but has to be reciprocated by other members

of organizations who also have ability, integrity, and

benevolence. This is consistent with this article’s model

which proposes to nurture a climate of trust within the

organization where ethics-based trustworthiness is the most

important antecedent.

Ethical leadership (Schaubroeck et al. 2012) is a critical

antecedent of our proposed multilevel of ethical theory of

firm. Leadership is important because leaders control the

social influence in promoting ethical climate and conduct

in an organization (Brown et al. 2005, 2006; Brown and

Trevino 2006; Ehrhart 2004). This control operates both

directly through hierarchy and indirectly by creating shared

understanding around ethical values and norms (Detert and

Trevino 2010; Detert et al. 2007). The theory of ‘‘embed-

ded leadership’’, therefore, lies at heart of our proposed

multilevel model of ethical theory. This article departs

from Schaubroeck et al. because it not only takes into

account the superficial or artifact but also deep cultural

levels comprised of organizational values embedded by the

leaders through direct (hierarchy) and indirect (shared

understanding). The monoist Quantum view of organiza-

tions is ideally suited to support ethicality through ethical

leadership and trust building in organizations because of

their flatter structures, team cultures, and mutual trust on

each other.

A detailed discussion on ethics has already been

undertaken. Both consequence-driven and virtue ethics are

antecedents in our proposed model. This is intended to

strike a balance between economic and noneconomic

expectations of employees, stakeholders, and society at

large which (like organizations) is in a perpetual state of

flux and is continuously constructed and re-constructed

through organizational activities and actions. Virtue ethics

and self-transcending values seeking to nurture kindness,

peacefulness, respect of others, hard work, humanness,

righteousness, wisdom, justice, compassion, equity, hum-

bleness, repelling evil with good, avoiding arrogance,

greed and lust, and patience (all pursuing ‘‘higher goods’’)

form the heart of ethical climate envisioned through ethical

theory of the firm.

Organizational Practices

The above-mentioned antecedents cannot be realized

without employing a mix of the proposed organizational

practices of our model.

Scholars have empirically found that ethical trainings

improve moral and ethical behavior in a relatively short

span of time (Jones 2009). Studies also seem to confirm

that students and managers exposed to ethical courses or

trainings have a different conception of unethical behavior 6

6 Studies of ethical behavior of US, Australian, and Israeli business

students reveal that for them ‘‘only moral of business is making

money (and that) moral values are irrelevant to the business world’’

(Sims and Gegaz 2004).

410 N. Yazdani, H. S. Murad

123

(Tang and Chen 2008). The purpose of ethical trainings of

our model is obviously not only to gain short term but

lasting and sustainable impact on the organizational cul-

ture. The model does not recommend one universal and

standardized ‘‘text’’ for ethical trainings or else it will lose

its flexibility, contextuality, and localness. Trainings can be

designed around Kohlberg’s (1976) theory of stages of

moral development, cognitive-moral development theory

(Rest 1993) or Ritter’s (2006) study of ethics–morals

relationship. Trainings can also borrow from Aristotelian,

Confucian, or Divine-Commands-based religious philoso-

phies to inculcate ethical behavior in the employees. The

basic objective of these training activities is to create a

culture based on virtues and trust over and above pure

economic motives to work. The main aim of ethical

trainings is to bring about ethical changes at individual and

team/group levels from where they are expected to exert

their influence not only across the organization but also on

the stakeholders (who can be invited to be part of these

trainings) and ultimately on society at large. Another

function of the trainings would be to debunk the para-

doxical treatment meted out to the very notion of business

ethics by academia and corporate sector (p. 13).

The most crucial success factor of ethical trainings is not

their content but imparting methodology which needs to be

transformative in nature so that the participants are

equipped with the skills to reflect critically on their long

held beliefs about work, profession, business, organiza-

tional responsibilities toward society, and life. It is through

transformative learning alone that the training participants

would be emancipated from the ‘‘pedagogy of the

oppressed’’ 7

learning styles imposed on them through

conventional business education and training programs. A

collaboration of academia, industry, and consultant trainers

with a missionary zeal to bring about transformation in

their audience is of core importance in such an endeavor.

The ethical trainings not only need a particular pedagogy

but also the inculcation of reflection-action-reflection—

praxis to save them from becoming tools of imparting

either mere verbalism or thoughtless activism (p. 24).

Ethical trainings aiming to create ethicality in organi-

zations need to be strongly linked with performance

appraisals and reward system of the organization. They

should be included as the key performance indicator for all

employees across all levels of organization or else they

may be dismissed as yet another organizational fad failing

to create the desired long term and lasting impact.

Emanating from the streams of social accounting and

social audits, ethical audits are considered a ‘‘key man-

agement tool’’ (Belal 2002). Because of rising unethical

practices in sports over the last couple of decades, ethical

auditing is gaining more and more popularity in these

organizations (McNamee and Fleming 2007). This is one

of the tools recommended by our multilevel model of

ethicality. Such audits would gage the level of moral

development, equity, and other elements of ethical culture

of an organization. Specific procedural details of ethical

audits will vary across organizational settings but in gen-

eral they can be tied up with reward management and

performance appraisal systems of the organization.

Consequences

As already mentioned (p. 15), the purpose of a theory of

firm is to cater to human and societal needs. Aristotle

believed that all human actions aim at ‘‘good’’. He divided

this notion of good into superficial or external goods and

intrinsic or internal goods. External goods correspond to

the conventional economic goods resulting in wealth,

security, and power. Internal goods are, however, intan-

gible and like intrinsic motivation bring home an inner

satisfaction through performing a crafts related task. It is

this notion of internal good which Macintyre (1984,

pp. 190, 191) relates with his concept of practice or a

virtuous work activity which is in perfect harmony not only

with personal but also organizational and societal excel-

lence. In other words, organizational practices lead to the

creation of internal goods which in turn create societal

benefits and external goods (Wijnberg 2000). It is in this

backdrop that the consequences of the proposed model of

this article are discussed.

Social cognitive literature suggests that ethical behavior

is related with moral traits like being fair, compassionate,

honest, and caring. These and similar traits are collectively

defined by the construct of moral identity (Aquino and

Reed 2002). It is also suggested that different individuals

have different moral identities (Aquino et al. 2009). The

extent of moral identity regulates the very root values

underpinning ethicality of an individual. The above-men-

tioned antecedents and organizational practices aim to

create moral identities at individual, team, and organiza-

tional levels. This is what Hannah et al. (2011) term as

moral sensitization which leads to moral actions through

the agency of moral decision making and moral motiva-

tion. In terms of Argyris and Schon (1974; Argyris 1976),

ethical trainings would encourage an employee to chal-

lenge his/her long held beliefs and assumptions through

their transformative approach. This would result in nar-

rowing the gap between her/his espoused or public

behavior and actual actions undertaken both inside and

7 Oppression is used here to mean the conventional educational and

organizational pressures of relentless economics-driven individual-

ism, over competitive behavior and the mindset to equate success

only and only with material gains.

Toward an Ethical Theory of Organizing 411

123

outside the organization. The first major consequence of

our model is, therefore, increased moral efficacy, moral

courage, moral identity, and OCB across all levels of an

organization.

Traditional Modernist theories of firm have relied on

resources to base competitive advantage for firms. While

the industrial organization (I/O) view has looked externally

toward environment (Das and Teng 2000) the resource-

based and knowledge-based perspectives connect organi-

zational growth and survival with a firm’s internal capa-

bilities and competencies (Wernerfelt 1984; Hamel and

Prahalad 1989; Hitt et al. 2001). Our proposed model posits

trust as the binding glue not only among the internal but

also the external stakeholders of a firm. A morally and

ethically conscious organization inspired by ethical leaders

promoting to create organizational trust and employing the

ethicality and trust-building organizational practices, are

bound to enhance their firm’s ability to retain both

employees and customers through moral rather than pure

economic intentions. The mix of result-oriented and virtue

ethics inculcated in the organizational members would lead

to enhanced organizational legitimacy, repute, and stake-

holders’ trust. In this sense, our model portrays trust

dependence as the main resource and capability for

attaining sustained competitive advantage because trust

when viewed as a capability is valuable, inimitable, rare,

and difficult to substitute. Our trust dependence view of the

firm is a point of departure from mainstream strategy lit-

erature underpinned by resource dependence.

Although a coherent theory of organizing based solely

on ethics has not emerged but individual studies do link

enhanced stakeholders’ trust and increased ethical devel-

opment of a firm with its improved financial performance

(Chun et al. 2011; Staw 1991; Scott 1995; Detert et al.

2008; Jo and Kim 2008). The most important implication

of our model is that improved financial performance is a

natural and automatic outcome of increased firm ethicality.

In stark contrast to current theories of firm, our theory

posits ethics and not profit as the end motive. Profits are a

natural fall out of ethically and morally developed firms.

Which firm will not be profitable if it has stakeholders’

trust and confidence because of its high repute and legiti-

macy? The pursuance of internal or higher goods, attained

through transformative training emancipating organization

members from the current utility laden values, is a sure

ticket to the attainment of external or economic goods.

The above discussion leads to the following proposition

of this article:

Proposition Intent-based ethicality and morality, ethical

leadership, organizational trust all nurtured in a suitable

structure and strengthened by organizational practices such

as ethical trainings imparted to provoke critical thinking

and self-transformation in employees, linking of ethical

and moral behavior with performance appraisals and reg-

ular ethical audits would lead to enhanced moral efficacy

across all levels of organization resulting in high stake-

holders’ trust and increased firm performance. Each ele-

ment of the model will reciprocally strengthen the other

and result in trust-based sustained and lasting competitive

advantage for the firm.

Ethical Theory of Organizing and Schooling

in Organization Theory: A Brief Analysis

We will now analyze the six attributes of an organization

theory school discussed in the earlier section in some detail

in an organizational context. An organization is novel

because it has its own recipe for competitive advantage,

goals, and objectives, mix of employees, strategies, vision,

leadership style, structure, processes, and stakeholders. At

the same time, it is in continuity within an industrial sector,

environment, society, and culture (which can be national or

international) or stakeholders at large. It has a scope

because organizational members enact their organizations’

novelty and continuity of which the consumers and society

make sense to gain legitimacy. Organizations also generate

research streams which are not only academic in nature but

also action and corporate research. Similarly systems’

theory (closed, open, cybernetic, or complex) and Mintz-

berg’s schools of strategic management revolve around

strategy (whether prescriptive or emergent) goals and

objectives, leadership vision, structures, and stakeholders.

From a purely organizational perspective, it can be

argued that an organization is underpinned by five com-

ponents: boundaries (novel yet continuous), goals and

objectives, vision and strategy, leadership, and interorga-

nizational connections manifested in the form of

stakeholder.

We will now undertake the discussion to assess whether

our proposed ethical theory qualifies to be a theory of firm

or school of organization theory.

Positing ethics as the main purpose of existence of a firm

is a novel idea. The components of multilevel ethical the-

ory may not be novel individually but interlinking them for

the purpose of ethicality is definitely novel. The most novel

idea of the theory is, however, its tenet that profit is

automatic and natural fallout of ethicality, i.e., ethics and

not profits are the ultimate end of an organization’s exis-

tence. This is diametrically opposite to all the current

theories of firms and schools in organization theory and,

therefore, novel and unique.

At the same time, our proposed theory is continuous

with academic literature and corporate practices. It borrows

412 N. Yazdani, H. S. Murad

123

from well-established moral philosophical, economical,

political, educational, leadership, and organizational

structural theories and the proposed organizational prac-

tices are also consistent with training and development,

performance appraisal and audit practices of the corporate

sector.

The theory has a broad scope in the sense that it com-

bines novelty and continuity and has the potential to create

‘‘ambiguity’’ or curiosity for scholars to undertake future

empirical research to test its various components. Through

enactment of ethicality in organizations, which depends on

the societal and cultural norms surrounding the organiza-

tion, the theory has the potential to be reified to set into

motion self-reinforcing and self-fulfilling social dynamics.

Since ethical theory of the firm fulfills five attributes it is

only natural to expect that it would gain legitimacy from

intellectual and scholarly circles. We, therefore, argue that

our proposed ethical theory of firm qualifies to be a

developing school of organization theory.

We now briefly analyze our theory in the light of five

components identified above. An ethical organization is

bounded by ethicality. It exudes ethicality which pervades

its environment and stakeholders through its ethical and

transformational leadership and vision. Ethically driven

organizations would nurture trust-dependent relationships

with all of their stakeholders both within and outside it. It is

obvious that such organizations would craft their goals,

objectives, business, and functional strategies which are

based on ethics of virtue and excellence and morality. This

makes it quite plausible that ethical theory of firm qualifies

as a viable developing theory or school within organization

theory perspective.

The following table presents comparative focal points

between traditional and ethical theory of firm as high-

lighted throughout this article (Table 2).

Main Conclusions

As mentioned earlier (p. 11), Dobson (2009) identifies

individualism, competitiveness, and exaltation of market

over society as three main unethical trends of current

economic and organizational order. Organizations cannot

eschew their full societal responsibilities under the cover of

legalities alone. Academia’s dealing with business ethics,

be it philosophical or descriptive, has not have much suc-

cess in translating them into wholistic ethicality embedding

business norms and practices. The overruling motive of

organizations is purely economic, and organizational ethics

are marginalized as cosmetic and ineffective initiatives.

This results from the utilitarian ethics which are taken as

granted to underpin theories of firm. The fully integrated

ethical view of firm presented in this article calls for

utilizing a mix of utility and virtue ethics practiced in

nondualist and nonmodernist organizational settings and

facilitated by transformative ethical trainings leading to

ethical climate in the organizations. Organizational mem-

bers of such firms would be fully ethically conscious pro-

fessionals not because their focus is narrowly limited to

their organizations but because they are trained and

inspired to be wholistic societal professionals as well.

Ethical organizations’ main intent would be to fulfill their

societal obligations, an objective much larger and wholistic

than the pure profit motive of contemporary organizations.

Ethical theory of firm posits ethicality (not mere legality

and cosmetic initiatives) first and in the forefront and

argues that profits would be a natural and automatic out-

come. This is the essence of the multilevel model of ethi-

cality presented in Fig. 4.

Future Directions

Ethicality and Firm Success

As mentioned above, individual elements of our models

have been linked to enhanced corporate performance.

Our model combines the elements of organizational trust,

ethical behavior, intention-based virtues, monoist quan-

tum organizational design, and transformative learning.

These elements coupled with organizational practices

would have an ‘‘additive’’ impact on each other to build

stakeholders’ and societal trust which apart from leading

to enhanced firm repute and legitimacy would also cause

building up of its bottom line. This level of firm success

will be wholistic and not merely economic because the

firm will also be fulfilling its societal obligations will-

ingly and with intent and not because of legal require-

ments or as a public relations endeavor wrapped in its

promotional strategy for pure economic gains. As shown

in Fig. 4 the model has in-built loops in it. For example

antecedents, organizational practices, and consequences

are not only related in a unidirectional way but also

consequences feedbacks to organizational practices

which further strengthens ethical climate of the firm.

Similarly, organizational success in terms of financial

performance would further strengthen the antecedents,

practices, and consequences of ethicality and morality.

Positive societal impact of organizations will also create

similar positive feedback loops to further enhance

organizational success and societal wellbeing. From a

futuristic perspective, it would be important if organi-

zation theorists, sociologists, ethicists, religious and

political scientists, and corporate consultants evaluate

and refine this model further.

Toward an Ethical Theory of Organizing 413

123

Flexibility and Generalizability of the Model

The proposed model is not prescriptive in any way. It does

not suggest any particular brand of morality and virtues.

The model is, therefore, not culture, nation, or religion

specific. It seeks to create ‘‘goodness’’ in organizations no

matter what the inspiration may be. The model can be

equally effectively applied across cultures and at the same

time fully embraces and allows for localness, contextuality,

and local values and norms. It only requires that universal

notions of ‘‘good’’ or what Kant describes as categorical

imperatives or Aristotle as ‘‘higher goods’’ or Taoism as

‘‘the way’’ or the Quran and Prophetic traditions as the

‘‘Straight Path’’ be practiced with intent in the organiza-

tional backdrop.

Empirical Testing of the Model

Many of the elements of the model like organizational

trust, ethical leadership, stages of moral development

(antecedents), effectiveness of ethical trainings, ethical

audits, transformative learning and critical thinking pro-

pensities (organizational practices) and OCB, firm repute,

stakeholders’ confidence, and balance scorecards measur-

ing organizational success (consequences) have valid and

reliable instruments to measure. Further empirical research

can consolidate these instruments to empirically test our

proposed model. Another important future research con-

sideration would be using different units of analyses

(individual, departments, and organization) to test and

strengthen the multilevel nature of the model. The

Table 2 Comparative focal points between traditional and ethical theory of firm

Key organization theory aspects Traditional theories/schools of firm Ethical theory/school of firm

Philosophical assumptions Cartesian dualism, compartmentalization of

knowledge

Nondualist monism

Scientific assumptions Newtonian physics Einstein’s physics and complexity sciences

Ethical underpinnings Utilitarian and consequences dependent Virtue ethics of excellence based on trust and

morality leading to material and business

decisions

Business education and corporate

training requirements

Traditional, nontransformative with entire focus on

commercialism

Emancipatory and transformative

Profit motive Ultimate end Natural, automatic but means to achieve the

ultimate end of ethicality

Societal impact Inequalities, dominance of one over ninety nine

percent, patchy, cosmetic, and PR-oriented

initiatives like CSR

Wholistic ethical impact on society through

‘‘double hermeneutic’’ of sociology

Scope for incorporating localness,

contextuality, history, anthropology

and religious views

Limited, restrictive, and rigid Wholistic and flexible

Paradigmatic crisis of organization

theory

Increasing it through compartmentalization

between different knowledge spheres

Probably a solution

Ultimate resource to rely Competencies and capabilities ensuring material

gains called sustained competitive advantage

Trust and morality are the main competencies and

capabilities for gaining wholistic sustained

competitive advantage

Paradox of Business Ethics Promotes it by borrowing ethical theory from

philosophy but applying social science empirical

methods to implement ethics

Ethical theory borrowed from philosophy and

divine-commands and applied by carefully

chosen organizational practices

Orientation Ruthless individualism and over competitiveness Trust and virtue ethics-based collectivism arising

from but transcending organizational boundaries

Organizational boundaries Sharply differentiating organizational and societal

well being

Well integrated with society through positive

impact of ethicality enacted in the organizations

Goals and objectives Largely limited to organizations’ financial success

(pork-barrel view)

Wholistic seeking to build morality through trust

and transformation

Vision/strategy Pork-barrel Wholistic

Leadership style Transactional, transformational, and charismatic

aimed at material gains

Transactional, transformation, and servant aimed

at ethicality and morality building

Organizational interconnections Traditional stakeholders’ view Ethical stakeholders’ view

414 N. Yazdani, H. S. Murad

123

applicability of the model across different industries and

cultures is also a major future research implication of this

study.

Is Ethical Theory a Theory of Organizing?

This article has argued that ethical paradigm of organizing

emerges as a school of organization theory because it ful-

fills six attributes identified by McKinley et al. (1999)

along with the five derivatives (organizational boundary,

goals and objectives, strategy and vision, leadership, and

interorganizational connections) of systems’ view. Our

arguments present a challenging and interesting milieu for

future researchers.

References

Aldrich, H. E. (1999). Organizations evolving. London: Sage

Publications.

Ali, A. J., & Al-Owaihan, A. (2008). Islamic work ethic: A critical

review. Cross Cultural Management, 15(1), 5–19.

Ambler, T., Witzel, M., & Xi, C. (2009). Doing business in China

(3rd ed.). New York: Routledge.

Aquino, K., Freeman, D., Reed, A., Lim, V. K. G., & Felps, W.

(2009). Testing a social-cognitive model of moral behavior: The

interactive influence of situations and moral identity centrality.

Journal of Personality and Social Psychology, 97, 123–141.

Aquino, K., & Reed, A. (2002). The self-importance of moral

identity. Journal of Personality and Social Psychology, 83,

1423–1440.

Ardichvili, A., Mitchell, J. A., & Jondle, D. (2009). Characteristics of

ethical business cultures. Journal of Business Ethics, 85(4),

445–451.

Argandona, A. (2007). Anthropological and ethical foundations of

organization theory. University of Navarra Working Paper WP

no. 707. http://ssrn.com/abstract=1032117.

Argyris, C. (1976). Single-loop and double-loop models in research

on decision making. Administrative Science Quarterly, 21(3),

363–375.

Argyris, C., & Schon, D. A. (1974). Theory in practice. San

Francisco, CA: Jossey-Bass.

Arjoon, S. (2000). Virtue theory as a dynamic theory of business.

Journal of Business Ethics, 28(2), 159–178.

Armstrong, K. (2002). Islam: A short history. London: The Orion

Publishing Group, Phoenix Press.

Bacharach, S. B. (1989). Organizational theories: Some criteria for

evaluation. The Academy of Management Review, 14(4),

496–515.

Belal, A. (2002). Stakeholder accountability or stakeholder manage-

ment: A review of UK firms’ social and ethical accounting,

auditing and reporting (SEAR) practices. Corporate Social

Responsibility and Environmental Management, 9, 8–25.

Bertland, A. (2009). Virtue ethics in business and the capabilities

approach. Journal of Business Ethics, 84(1), 25–32.

Bloom, A. (1987). The closing of the American mind. New York:

Simon & Schuster.

Brady, n., & Hart, D. (2007). An exploration into the development

psychology of ethical theory with implications for business

practice and pedagogy. Journal of Business Ethics, 76(4),

397–412.

Bragues, G. (2006). Seek the good life, not money: The Aristotelian

approach to business ethics. Journal of Business Ethics, 67(4),

341–357.

Brown, M. E., Harrison, D., & Trevino, L. K. (2005). Ethical

leadership: A social learning perspective for construct develop-

ment and testing. Organizational Behavior and Human Decision

Processes, 97, 117–134.

Brown, M. E., & Trevino, L. K. (2006). Ethical leadership: A review

and future directions. Leadership Quarterly, 91, 954–962.

Bucaille, M. (2003). The Bible, The Quran, and Science: The Holy

Scriptures examined in the light of modern knowledge. New

York: Tahrike Tarsile Quran Inc.

Burrell, G., & Morgan, G. (1979). Sociological paradigms and

organizational analysis: Elements of the sociology of corporate

life. London: Heinemann.

Burton, B. K., & Goldsby, M. G. (2009). The moral floor: A

philosophical examination of the connection between ethics and

business. Journal of Business Ethics, 91, 145–154.

Caldwell, C., Davis, B., & Devine, J. A. (2009). Trust, faith, and betrayal: Insights from management for the wise believer.

Journal of Business Ethics, 84(1), 103–114.

Carr, A. Z. (2002). Is business bluffing ethical (Extracted from

Hartman L. (2002)), pp. 100–107.

Chan, G. K. Y. (2008). The relevance and value of Confucianism in

contemporary business ethics. Journal of Business Ethics, 77(3),

347–360.

Chun, J. S., Shin, Y., Choi, J. N., & Kim, M. S. (2011). How does

corporate ethics contribute to firm financial performance? The

mediating role of collective organizational commitment and

organizational citizenship behavior. Journal of Management,

39(4), 853–877.

Cohen, B. (1980). Developing sociological knowledge: Theory and

method. Englewood Cliffs, NJ: Prentice Hall.

Colquitt, J. A., Lepine, J. A., Zapata, C. P., & Wild, R. E. (2011).

Trust in typical and high-reliability contexts: Building and

reacting to trust among firefighters. Academy of Management

Journal, 54(5), 999–1015.

Conner, K. R. (1991). A historical comparison of resource-based

theory and five schools of thought within industrial organization

economics: Do we have a new theory of the firm? Journal of

Management, 17(1), 121–154.

Crossan, M., Lane, H., White, R. E., & Djurfeldt, L. (1995).

Organizational learning: Dimensions for a theory. International

Journal of Organizational Analysis, 3, 337–360.

Crotty, M. (1998). The Foundations of Social Research: Meaning and

Perspective in the Research Process. London: Sage Publica-

tions.

Cunningham, P. H., Frauman, E., Ivy, M. I., & Perry, T. L. (2004).

The value of money and leisure and college student’s choice of

major. SCHOLE, 19, 65–72.

Daft, R. L., & Lewin, A. Y. (1993). Where are the theories for the

‘new’ organizational forms? An editorial essay. Organization

Science, 4, i–iv.

Das, T. K., & Teng, B.-S. (2000). A resource-based theory of strategic

alliances. Journal of Management, 26(1), 31–61.

Davis, G. F., & Marquis, C. (2005). Prospects for organization theory

in the early twenty-first century: Institutional fields and mech-

anisms. Organization Science, 16(4), 332–343.

De Cremer, D., Dick, R. V., Tenbrunsel, A., Pillutla, M., &

Murnighan, J. K. (2011). Understanding ethical behavior and

decision making in management: A behavioral business ethics

approach. British Journal of Management, 22, S1–S4. doi:10.

1111/j.1467-8551.2010.00733.x.

De George, R. T. (1994). A history of business ethics. Business Ethics

Quarterly, 4(1), 337.

Toward an Ethical Theory of Organizing 415

123

Detert, J. R., & Trevino, L. K. (2010). Speaking up to higher ups:

How supervisors and skip-level leaders influence employee

voice. Organization Science, 21, 249–270.

Detert, J. R., Trevino, L. K., Burris, E. R., & Andiappen, M. (2007).

Managerial models of influence and counter-productivity in

organizations: A longitudinal business-unit level investigation.

Journal of Applied Psychology, 92, 993–1005.

Detert, J. R., Trevino, L. K., & Sweitzer, V. L. (2008). Moral

disengagement in ethical decision making: A study of anteced-

ents and outcomes. Journal of Applied Psychology, 93, 374–391.

Dirkx, J. M. (2006). Engaging emotions in adult learning: A Jungian

perspective on emotion and transformative learning. In E.

W. Taylor (Ed.), Teaching for change. New directions for adult

and continuing education (Vol. 109, pp. 15–26). San Francisco,

CA: Jossey-Bass.

Dobson, J. (2009). Alasdair Macintyre’s Aristotelian business ethics:

A critique. Journal of Business Ethics, 86(1), 43–50.

Donzel, E. V. (1994). Islamic Desk Reference: Compiled from The

Encyclopedia of Islam. New York: E.J. Brill.

Durant, W. (1935). The story of civilization: Our oriental heritage.

New York: Simon & Schuster.

Durant, W. (2006). The story of philosophy: The lives and opinions of

the world’s greatest philosophers from Plato to John Dewey.

Pocket Books: Simon & Schuster.

Ehrhart, M. G. (2004). Leadership and procedural justice climate as

antecedents of unit-level organizational citizenship behavior.

Personnel Psychology, 57, 61–94.

English, F. W. (2001). What paradigm shift? An interrogation of

Kuhn’s idea of normalcy in the research practice of educational

administration. International Journal of Leadership in Educa-

tion, 4(1), 29–38.

Ericson, R. F. (1970). Organizational cybernetics and human values.

The Academy of Management Journal, 13(1), 49–66.

Freire, P. (1970). Pedagogy of the oppressed (M. B. Ramos, Trans.).

New York: The Seabury Press.

Ghoshal, S. (2005). Bad management theories are destroying good

management practices. The Academy of Management Learning

and Education, 4(1), 75–91.

Gimeno, J., Folta, T. B., Cooper, A. C., & Woo, C. Y. (1997).

Survival of the fittest? Entrepreneurial human capital and the

persistence of underperforming firms. Administrative Science

Quarterly, 42(4), 750–783.

Hamel, G., & Prahalad, C. K. (1989). Strategic intent. Harvard

Business Review, 67, 63–76.

Hannah, S. T., Avolio, B. J., & May, D. R. (2011). Moral maturation

and moral conation: A capacity approach to explaining moral

thought and action. Academy of Management Review, 36,

663–685.

Hawking, S. (1996). A brief history of time. Updated & expanded

edition. London: Bantam Press.

Hitt, M. A., Bierman, L., Shimizu, K., & Kochhar, R. (2001). Direct

and moderating effects of human capital on strategy and

performance in professional service firms: A resource-based

perspective. Academy of Management Journal, 44(1), 13–28.

Jacques, T. (2010). How to fight Google and win! Reputation

management textbook of strategies. Mandeville: Reagan Pub-

lishing LLC.

Jo, H., & Kim, Y. (2008). Ethics and disclosures: A study of the

financial performance of firms in the seasoned equity offerings

market. Journal of Business Ethics, 80(4), 855–878.

Jones, D. A. (2009). A novel approach to business ethics training:

Improving moral reasoning in just a few weeks. Journal of

Business Ethics, 88(2), 367–379.

Keynes, J.M. (1964). General theory of employment, interest and

money (1 st

Harbinger ed.). New York/London: Harcourt Brace

Jovanovich.

Kilmann, R. H. (2001) Quantum organizations: A new paradigm for

achieving organizational success and personal meaning (1 st

ed.).

Palo Alto, CA: Davies-Black Publishing.

Kochan, T. A. (2002). Addressing the crisis in confidence in

corporations: Root causes, victims, and strategies for reform.

Academy of Management Executive, 17, 139–141.

Kohlberg, L. (1976). Moral stages, moralization: The cognitive

development approach. In T. Lickona (Ed.), Moral development

and behavior. New York: Winston.

Krippner, G. R. (2011). Capitalizing on crisis: The political origins of

the rise finance. Cambridge, MA: Harvard University Press.

Kuhn, T. (1996). The structure of scientific revolutions (3rd ed.).

Chicago, IL: The University of Chicago Press.

Lincoln, Y., & Guba, E. (1985). Naturalistic inquiry. Beverly Hills,

CA: Sage.

Macintyre, A. (1984). After virtue (2nd ed.). Notre Dame: University

of Notre Dame Press.

March, J. G. (1991). Exploration and exploitation in organizational

learning. Organization Science, 2, 71–87.

Mayer, D. M., Aquino, K., Greenbaum, R. L., & Kuenzi, M. (2012).

Who displays ethical leadership, and why does it matter? An

examination of antecedents and consequences of ethical leader-

ship. Academy of Management Journal, 55(1), 151–171.

Mayer, R. C., Davis, J. H., & Schoorman, F. D. (1995). An integrated

model of organizational trust. Academy of Management Review,

20, 709–729.

McAuley, J., Duberley, J., & Johnson, P. (2007). Organization

theory: Challenges and perspectives. Harlow: Prentice Hall.

McCabe, D. L., Butterfield, K. D., & Trevino, L. K. (2006). Academic

dishonesty in Graduate business programs: Prevalence, causes,

and proposed action. Academy of Management Learning and

Education, 5(3), 294–305.

McKinely, W., Mone, M. A., & Moon, G. (1999). Determinants and

development of schools in organization theory. The Academy of

Management Review, 24(4), 634–648.

McKnight, D. H., Cummings, L. L., & Chervany, N. L. (1998). Initial

trust formation in new organizational relationships. Academy of

Management Review, 23(3), 473–490.

McMahon, D. (2009). String theory demystified: A self teaching

guide. New York: McGraw Hill.

McNamee, M. J., & Fleming, S. (2007). Ethics audits and corporate

governance: The case of public sector sports organizations.

Journal of Business Ethics, 73(4), 425–437.

Mezirow, J. (1994). Understanding transformation theory. Adult

Education Quarterly, 44, 222–232.

Mezirow, J. (1996). Contemporary paradigms of learning. Adult

Education Quarterly, 46(3), 158–172.

Mezirow, J. (2003). Transformative learning as discourse. Journal of

Transformative Education, 1(1), 58.

Mintzberg, H. (1990). Strategy formation: Schools of thought. In J.

W. Fredrickson (Ed.), Perspectives on strategic management.

New York: Harper & Row.

Mishina, Y., Dykes, B. J., Block, E. S., & Pollock, T. G. (2010).

Why ‘good’ firms do bad things: The effects of high

aspirations, high expectations, and performance on the inci-

dence of corporate illegality. Academy of Management Journal,

53(4), 701–722.

Mook, D. E., & Vargish, T. (1987). Inside relativity. Princeton, NJ:

Princeton University Press.

Moore, B. N., & Bruder, K. (2001). Philosophy: The power of ideas

(5th ed.). New York: McGraw-Hill.

Morgan, G. (1998). Images of Organizations (Executive ed.). San

Francisco, CA: Berrett-Kochler Publishing Inc.

Morgan, G., & Smircich, L. (1980). The case for qualitative research.

Academy of Management Review, 5(4), 491–500.

416 N. Yazdani, H. S. Murad

123

Murphy, J. (1999). The quest for a center: Notes on the state of the

profession of educational leadership. Columbia, MI: University

Council for Educational Administration.

Nasr, S. H. (1987). Traditional Islam in the Modern World. Lahore:

Suhail Academy.

Nietzsche, F. (2007). Thus spake zarathustra (T. Common, Trans.).

Stilwell: Digireads.Com Publishing.

Ojeili, C. (2002). Post-modernism, the return to ethics and the crisis

of socialist values. Democracy & Nature, 8(3), 397–421.

Pfeffer, J. (1992). Understanding power in organizations. California

Management Review, Winter, 29–50.

Pfeffer, J. (1993). Barriers to the advance of organizational science:

Paradigm development as a dependent variable. Academy of

Management Review, 18(4), 599–620.

Pfeffer, J. (2005). Why do bad management theories persist? A

comment on Ghoshal. The Academy of Management Learning

and Education, 4(1), 96–100.

Pfeffer, J., Ferraro, F., & Sutton, R. J. (2009). How and why theories

matter: A comment on Felin and Foss (2009). Organization

Science, 20(3), 669–675.

Pfeffer, J., & Fong, C. T. (2002). The end of business schools? Less

success than meets the eye. Academy of Management Learning

and Education, 1, 78–95.

Pirson, M., & Malhotra, D. (2011). ‘‘Foundations of organizational

trust: What matters to different stakeholders’’? Organization

Science, 22(4), 1087–1104.

Pojman, L. P. (2002). Ethical Theory: Classic and contemporary

readings (4th ed.). Belmont, CA: Thomson Learning,

Wadsworth.

Rest, J. (1993). Guide for the defining issues test: How to use the

optical scan forms and the center’s scoring service. Minneapolis,

MI: University of Minnesota.

Ritter, B. A. (2006). Can business ethics be trained? A study of the

ethical decision making process in business students. Journal of

Business Ethics, 68, 153–164.

Roberts, J. (2004). The modern firm: Organizational design for

performance and growth. Oxford: Oxford University Press.

Russell, B. (1945). A history of Western philosophy. New York:

Simon & Schuster.

Schoorman, F. D., & Davis, J. H. (2007). An integrative model of

organizational trust: Past, present, and future. Academy of

Management Review, 32(2), 344–354.

Schaubroeck, J. M., Hannah, S. T., Avolio, B. J., Kozlowski, S. W. J.,

Lord, R. G., Trevino, L. K., et al. (2012). Embedding ethical

leadership within and across organization levels. Academy of

Management Journal, 55(5), 1063–1078.

Schoorman, F. D., Mayer, R. C., & Davis, J. H. (1996). Organiza-

tional trust: Philosophical perspectives and conceptual defini-

tions. The Academy of Management Review, 21(2), 337–340.

Scott, W. R. (1995). Institutions and organizations. Thousand Oaks,

CA: Sage.

Seidman, D. (2004). The case for ethical leadership. Academy of

Management Executive, 18(2), 134–138.

Senge, M. P. (1994). The fifth discipline: The art & practice of the

learning organization. New York: Currency Doubleday.

Shaw, W. H., & Barry, V. (1992). Moral issues in business (5th ed.).

Belmont, CA: Wadsworth Publishing Company.

Simon, H. A. (1995). Organizations and markets. Journal of Public

Administration Research and Theory, 5(3), 273–294.

Sims, R. R. (1992). The challenge of ethical behavior in organiza-

tions. Journal of Business Ethics, 11(7), 505–513.

Sims, R. L., & Gegaz, A. E. (2004). Attitudes towards business ethics:

A five nation comparative study. Journal of Business Ethics, 50,

253–265.

Stacy, R. D. (2007). Strategic management and organizational

dynamics: The challenge of complexity (5th ed.). Upper Saddle

River, NJ: Prentice-Hall.

Staw, B. M. (1991). Dressing up like an organization: When

psychological theories can explain organizational action. Journal

of Management, 17, 805–819.

Takala, T. (1998). Plato on leadership. Journal of Business Ethics,

17(7), 785–798.

Tamney, J. B., & Chiang, L. H. L. (2002). Modernization, global-

ization, and Confucianism in Chinese societies. Westport, CT:

Praeger Publishers.

Tang, T. L. P., & Chen, Y. J. (2008). Intelligence vs. wisdom: The

love of money, Machiavellianism, and unethical behavior across

college major and gender. Journal of Business Ethics, 82(1),

1–26.

Tang, T. L. P., & Chiu, R. K. (2003). Income, money ethic, pay

satisfaction, commitment, and unethical behavior: Is the love of

money the root of evil for Hong Kong employees? Journal of

Business Ethics, 46, 13–30.

Trevino, L. K., & Brown, M. E. (2004). Managing to be ethical:

Debunking five business ethics myths. Academy of Management

Executive, 18(2), 69–81.

Trevino, L. K., Butterfield, K. D., & McCabe, D. L. (1998). The

ethical context in organizations: Influences on employee attitude

and behaviors. Business Ethics Quarterly, 8, 447–476.

Trevino, L. K., & Weaver, G. R. (1994). Business ethics: One field or

two? Business Ethics Quarterly, 4, 113–128.

Valentine, S., & Barnett, T. (2002). Ethics code and sales profes-

sionals’ perceptions of their organizations’ ethical values.

Journal of Business Ethics, 40, 191–200.

Waddock, S. A., & Graves, S. B. (1997). The corporate social

performance–financial performance link. Strategic Management

Journal, 18, 303–319.

Watson, P. (2005). Ideas: A history from fire to Freud. London:

Weidenfeld & Nicolson.

Wernerfelt, B. (1984). A resource-based view of the firm. Strategic

Management Journal, 5(2), 171–180.

Whetstone, J. T. (2001). How virtues fits within business ethics.

Journal of Business Ethics, 33, 101–114.

Whyte, W. H., Jr. (1956). The organization man. New York:

Touchstone/Simon & Schuster.

Wijnberg, N. M. (2000). Normative stakeholder theory and Aristotle:

The link between ethics and politics. Journal of Business Ethics,

25, 329–342.

Wilson, D. S., Near, D., & Miller, R. R. (1996). Machiavellianism: A

synthesis of evolutionary and psychological literatures. Psycho-

logical Bulletin, 119, 285–299.

Wines, W. A. (2008). Seven pillars of business ethics: Toward a

comprehensive framework. Journal of Business Ethics, 79,

483–499.

Worden, S. (2009a). A genealogy of business ethics: A Nietzschean

perspective. Journal of Business Ethics, 84, 427–456.

Worden, S. (2009b). Aristotle’s wealth: The role of limitation in

thwarting misordered concupiscence. Journal of Business Ethics,

84(2), 209–212.

Toward an Ethical Theory of Organizing 417

123

Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.