2-Pages - ETHICAL CHALLENGES

The Challenge of Ethical Behavior in Organizations Ronald R. Sims

ABSTRACT. This paper is designed to do three things while discussing the challenge of ethical behavior in organi- zation. First, it discusses some reasons why unethical be- havior occurs in organization. Secondly, the paper highlights the importance of organizational culture in establishing an ethical climate within an organization. Finally, the paper presents some suggestions for creating and maintaining an ethically-oriented culture.

It has often been said that the only constant in life is change, and nowhere is this more true than in the workplace. As one recent survey concluded, "Over the past decade, the U.S. corporation has been battered by foreign competition, its own out-of-date technology and out-of-touch management and, more recently a flood of mergers and acquisitions. The result has been widespread streamlining of the white-collar ranks and recognition that the old way of doing business is no longer possible or desirable" {U.S News & World Report, 1989, p. 42).

As the twenty-first century approaches, compa- nies face a variety of changes and chaUenges that will have a profound impact on organizational dynamics and performance. In many ways, these changes will decide who will survive and prosper into the next century and who will not. Among these challenges are the following:

(1) The challenge of international competition. (2) The challenge of new technologies.

Ronald R. Sims is Associate Professor in the School of Business

Administration at the College of William and Mary. His research

interests include ethical behavior, experiential teaming, employee

and management training and development, and organizational

transitions. His articles have appeared in a variety of scholarly

and practitioner-oriented journals.

(3) The challenge of increased quality. (4) The challenge of employee motivation and commit-

ment. (5) The challenge of managing a diverse workforce. (6) The challenge of ethical behavior.

While these chaUenges must all be met by organiza- tions and managers concerned about survival and competitiveness in the future, this paper will focus on the challenge of ethical behavior. More specifi- cally, this paper will (1) discuss some reasons' un- ethical behavior occurs in organizations, (2) highlight the importance of organizational culture in estab- lishing an ethical climate within the organization, and finally, (3) present some suggestions for creating and maintaining an ethically-oriented culture.

Ethics and the challenge of ethical behavior

The imperatives of day-to-day organizational per- formance are so compelling that there is little time or inclination to divert attention to the moral con- tent of organizational decision-making. Morality appears to be so esoteric and qualitative in nature that it lacks substantive relation to objective and quantitative performance. Besides, understandii^ the meaning of ethics and morality requires the distasteful reworking of long-forgotten classroom studies. What could Socrates, Plato, and Aristotle teach us about the world that confronts organiza- tions approachii^ the twenty-first century? Possibly a gap in philosophical knowledge exists between organizational executives and administrators of dif- ferent generations. Yet, hke it or not, there has and will continue to be a surge of interest in ethics.

The word "ethics" is often in the news these days. Ethics is a philosophical term derived from the

Journal of Business Ethics 11: 505-513,1992. © 1992 Kluwer Academic Publishers. Printed in the Netherlands.

506 Ronald R. Sims

Greek word "ethos" meaning character or custom. This definition is germane to efFective leadership in organizations in that it connotes an organization code conveying moral integrity and consistent values in service to the public. Certain organizations will commit themselves to a philosophy in a formal pronouncement of a Code of Ethics or Standards of Conduct. Having done so, the recorded idealism is distributed or shelved, and all too often that is that. Other organizations, however, will be concerned with aspects of ethics of greater specificity, useful- ness, and consistency.

Formally defined, ethical behavior is that which is morally accepted as "good" and "right" as opposed to "bad" or "wrong" in a particular setting, b it ethical, for example, to pay a bribe to obtain a business contract in a foreign country? b it ethical to allow your company to withhold information that might discourage a job candidate from joining your organi- zation? b it ethical to ask someone to take a job you know will not be good for their career progress? b it ethical to do personal business on company time?

The list of examples could go on and on. Despite one's initial inclinations in response to these ques- tions, the major point of it all is to remind organiza- tions that the public-at-large is demanding that goverrunent officials, managers, workers in general, and the organizations they represent all act accord- ing to high ethical and moral standards. The future will bring a renewed concern with maintaining high standards of ethical behavior in organizational trans- actions and in the workplace.

Many executives, administrators, and social scien- tists see unethical behavior as a cancer working on the fabric of society in too many of today's organiza- tions and beyond. Many are concerned that we face a crisis of ethics in the West that is undermining our competitive strength. This crisis involves business- people, government officials, customers, and em- ployees. Especially worrisome is unethical behavior among employees at all levels of the organization. For example, a recent study found that employees accounted for a higher percentage of retail thefts than did customers (Silverstein, 1989). The study estimated that one in every fifteen employees steals from his or her employer.

In addition, we hear about illegal and unethical behavior on Wall Street, pension scandals in which disreputable executives gamble on risky business

ventures with employees' retirement funds, compa- nies that expose their workers to hazardous working conditions, and blatant favoritism in hiring and promotion practices. Although such practices occur throughout the world, their presence nonetheless serves to remind us of the challenge facing organiza- tions.

This challenge is especially difficult because standards for what constitutes ethical behavior lie in a "grey zone" where clear-cut right-versus wrong answers may not always exist. As a result, sometimes unethical behavior is forced on organizations by the environment in which it exists and laws such as the Foreign Corruption Practices Act. For example, if you were a sales representative for an American company abroad and your foreign competitors used bribes to get business, what would you do? In the United States such behavior is illegal, yet it is perfectly acceptable in other countries. What is ethical here? Similarly, in many countries women are systematically discriminated against in the work- place; it is felt that their place is in the home. In the United States, again, this practice is illegal. If you ran an American company in one of these countries, would you hire women in important positions? If you did, your company might be isolated in the larger business community, and you might lose business. If you did not, you might be violating what most Americans believe to be fair business practices.

The effective management of ethical issues re- quires that organizations ensure that their managers and employees know how to deal with ethical issues in their everyday work lives. Therefore, organiza- tional members must first understand some of the underlying reasons for the occurrence of unethical practices.

Unethical behavior: vtrhy does it occur in organizations?

The potential for individuals and organizations to behave unethically is limitless. Unfortunately, this potential is too frequently realized. Consider, for example, how greed overtook concerns about human welfare when the Manville Corporation suppressed evidence that asbestos inhalation was killing its employees, or when Ford failed to correct a known defect that made its Pinto vulnerable to gas tank

challenge of Ethical Behavior in Organizations 507

explosions following low speed rear-end collisions (Bucholz, 1989). Companies that dump dangerous medical waste materials into our rivers and oceans also appear to favor their own interests over public safety and welfare. Although these examples are better known than many others, they do not appear to be unusual. In fact, the story they tell may be far more typical than we would like, as one expert estimates that about two-thirds of the 500 largest American corporations have been involved in one form of illegal behavior or another (Gellerman, 1986).

Unfortunately, unethical organizational practices are embarrassingly commonplace. It is easy to define such practices as dumping polluted chemical wastes into rivers, insider trading on Wall Street, over- charging the government for Medicaid services, and institutions like Stanford University inappropriately using taxpayer money to buy a yacht or to enlarge their President's bed in his home as morally wrong. Yet these and many other unethical practices go on almost routinely in many organizations. Why is this so? In other words, what accounts for the unethical actions of people in organizations, more specifically, why do people commit those unethical actions in which individuals knew or should have known that the organization was committing an unethical act? An example recently provided by Baucus and Near (1991) helps to illustrate this distinction.

Recently, a federal court judge found Allegheny Bottling, a Pepsi-Cola bottling franchise, guilty of price fixing. The firm had ended years of cola wars by setting prices with its major competitor, Mid-Atlantic Coca-Cola Botding (New York Times, 1988). Since evidence showed most executives in the firm knew of the illegal price- fixing scheme, the court not only fined Allegheny $1 million but also sentenced it to three years in prison — a sentence that was suspended since a firm cannot be imprisoned. However, the unusual penalty allowed the judge to place the firm on probation and significantly restrict its operations.

In another case, Harris Corporation pleaded no con- test to charges that it participated in a kickback scheme involving a defense department loan to the Philippines (Wall Street Journal, 1989). Although this plea cost the firm $500,000 in fines and civil claims, Harris's chief executive said the firm and its employees were not guilty of criminal conduct; he maintained that top managers pleaded no contest because the costs associated with

litigation would have been greater than the fines, and litigation would have diverted management attention from firm operations.

Although both cases appear to be instances of illegal corporate behavior, there is an important distinction between them. In the first case, Allegheny's execu- tives knew or should have known the firm's activities were illegal; price fixing is a clear violation of anti- trust law. Further, the courts ruled that evidence indicated the firm had engaged in the illegal act. In contrast, it is not clear that Harris Corporations' managers committed an illegal act. Some areas of the law are very ambiguous, including the area relevant to this case, the Foreign Corrupt Practices Act, and managers may not at times know what it legal or illegal; thus, a firm may inadvertently engage in behavior that is later defined as illegal or unethical (Baucus and Near, 1991).

One answer to the question of why individuals knowingly commit unethical actions is based on the idea t h a t organizations often reward behaviors that violate

ethical standards. Consider, for example, how many business executives are expected to deal in bribes and payoffs, despite the negative publicity and ambiguity of some laws, and how good corporate citizens who blow the whistle on organizational wrongdoing may fear being punished for their actions. Jansen and Von Glinow (1985) explain that organizations tend to develop countemorms, accepted organizational prac- tices that are contrary to prevailing ethical standards. Some of these are summarized in Figure 1.

The top of Figure 1 identifies being open and honest as a prevailing ethical norm. Indeed, govern- mental regulations requiring full disclosure and free- dom of information reinforce society's values toward openness and honesty. Within organizations, how- ever, it is often considered not only acceptable, but desirable, to be much more secretive and deceitful. The practice of stonewallii^, willingly hiding rele- vant information, is quite common. One reason for this is that organizations may actually punish those who are too open and honest. Look at the negative treatment experienced by many employees who are willing to blow the whistle on unethical behavior in their organizations. Also, consider for example, the disclosure that B. F. Goodrich rewarded employees who falsified data on quality aircraft brakes in order to win certification (Vandevier, 1978). Similarly, it

508 Ronald R. Sims

has been reported that executives at Metropolitan Edison encouraged employees to withhold informa- tion from the press about the Three Mile Island nuclear accident (Gray and Rosen, 1982). Both inci- dents represent cases in which the counternorms of secrecy and deceitfulness were accepted and sup- ported by the organization.

Figure 1 shows that there are many other organi- zational countemorms that promote morally and ethically questionable practices. Because these prac- tices are commonly rewarded and accepted suggests that organizations may be operating within a world that dictates its own set of accepted rules. This reasoning suggests a second answer to the question of why organizations knowingly act unethically — n a m e l y , b e c a u s e managerial values exist that undermine

integrity. In a recent analysis of executive integrity, Wolfe explains that managers have developed some ways of thinking (of which they may be quite unaware) that foster unethical behavior (Wolfe, 1988).

One culprit is referred to as the bottom-line- mentality. This line of thinking supports financial success as the only value to be considered. It pro- motes short-term solutions that are immediately financially sound, despite the fact that they cause problems for others within the organization or the organization as a whole. It promotes an unrealistic belief that everything boils down to a monetary

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Fig. 1. Societal norms vs. Organizational countemorms: an ethical confiict.

game. As such, rules of morality are merely obstacles, impediments along the way to bottom-line financial success.

A similar bottom-line mentality, the "political bottom line," is also quite evident in the public sector. For example, when it comes to spending money, the U.S. Congress has no equal. Although much of this expenditure is for purposes of national concern, a sizable portion is devoted to pork-barreling. Pork- barreling refers to the practice whereby a senator or representative forces Congress to allocate monies to special projects that take place in his or her home district. In many cases, the projects have little value and represent a drain on the taxpayers. They do, however, create jobs — and political support — in the home district. This practice is common, because many members of Congress believe it will help them get votes in the next election.

In some more extreme — and definitely ethically questionable — situations, such actions are designed to reward some large-scale campaign contributors in the home district. A case in point is the Maxi Cube cargo handling system. Funds for testing the Maxi Cube cargo handling system were written into the fiscal 1989 defense budget during the final Senate- House Appropriations conference at the request of Rep. John Murtha of Pennsylvania. The $10 million item was specifically targeted for a Philadelphia businessman (and contributor to Murtha's campaign) who was to manufacture the truck in Murtha's home district. The only problem was that the U.S. Army had clearly said that it had "no known requirement" for the handler. In response, Murtha was reported to be "mad as hell" at the "nitpicking" by the army. He pushed ahead anyway and used his position on the Appropriations cormnittee to freeze a series of military budgeting requests until he got his pet project approved.

And Murtha is not alone. Rep. Les Aspin of Wisconsin got the Defense Appropriations com- mittee to include $249 million to continue making a certain ten-ton truck (in Wisconsin, naturally) that the army was trying to phase out. It, too, was unneeded, but Aspin wanted the project for his home district. Is this legal? Yes? Is it ethical? That depends upon your point of view (Morgan, 1989). Clearly, Murtha and Aspin thought it was appro- priate, given the realities of today's private and public organizations.

challenge of Ethical Behavior in Organizations 509

Wolfe also notes that managers tend to rely on an exploitative mentality — a view that encourages "using" people in a way that promotes stereotypes and undermines empathy and compassion. This is a highly selfish perspective, one that sacrifices con- cerns for others in favor of benefits to one's own immediate interests. In addition, there is a Madison Avenue mentality — a perspective suggesting that anything is right if the public can be convinced that it's right. The idea is that executives may be more concerned about their actions appearing ethical than by their legitimate morality — a public relations- guided morality. It is this kind of thinking that leads some companies to hide their unethical actions (by dumping their toxic wastes under cover of night, for instance) or otherwise justify them by attempting to explain them as completely acceptable.

It is not too difficult to recognize how individuals can knowingly engage in unethical practices with such mentalities. The overemphasis on short-term monetary gain and getting votes in the next election may lead to decisions and rationalizations that not only hurt individuals in the long run, but threaten the very existence of organizations themselves. Some common rationalizations used to justify unethical behavior are easily derived from Gellerman (1986):

** Pretending the behavior is not really unethical or illegal.

** Excusing the behavior by saying it's really in the organization's or your best interest.

** Assuming the behavior is okay because no one else would ever be expected to find out about it.

** Expecting your superiors to support and pro- tect you if anything should go wrong.

Within the literature on corporate illegality, the predominant view is that pressure and need force organizational members to bebave unethically and develop corresponding rationalizadons; bowever, according to recent research tbis explanation only accounts for illegal acts in some cases (Baucus and Near, 1991). In tbeir data, poor performance and low organizational slack (tbe excess tbat remains once a firm bas paid its various internal and external constituencies to maintain cooperation) were not associated witb illegal bebavior, and wrongdoing frequendy occurred in munificent environments.

According to tbe model developed from Baucus

and Near's researcb (see Figure 2), illegal bebavior occurs under certain conditions. For example, results from tbeir researcb sbowed tbat (l) large firms are more likely to commit illegal acts tban small firms; (2) altbougb tbe probability of sucb wrongdoing increases wben resources are scarce, it is greatest wben resources are plentiful; (3) illegal bebavior is prevalent in fairly stable environments but is more probable in dynamic environments; (4) membership in certain industries and a bistory of repeated v^Tongdoing are also associated witb illegal acts; and, (5) tbe type of illegal activity cbosen may vary according to tbe particular combination of environ- mental and internal conditions under wbicb a firm is operating (Baucus and Near, 1991).

Baucus and Near also suggest tbat conditions of opportunity and predisposition are antecedents of illegal bebavior. Tbat is, ratber tban tigbtening conditions creating pressure for illegal acts, it may be tbat loosening ambiguous conditions create oppor- tunities to bebave illegally. In terms of tbe model presented in Figure 2, large firm size provided more opportunity to engage in illegal activities tban small size; tbe former condition may make it easy to bide illegal activities. Rules, procedures, and otber control mecbanisms often lag bebind growtb of a firm, providing organizational members witb an oppor- tunity to bebave illegally because no internal rules prescribe sucb bebavior.

Predisposition indicates a tendency or inclination to select certain activities — illegal ones — over activities because of socialization or otber organiza- tional processes. Baucus and Near (1991) avoid tbe assumption tbat a firm's managers or agents sub-

Source: 1991, Baucus, M. S. and Near, J. P.: 1991, 'Can Illegal Corporate Behavior Be Predicted? An Event History Analy- sis', Academy of Management Journal 34(1), pp. 9—36.

Fig. 2. Modified model of the illegal corporation behavior process.

510 Ronald R. Sims

scribe to a different set of etbical standards tban tbe rest of society. Instead, tbey recognize tbat organiza- tions, and industries, can exert a powerful influence on tbeir members, even tbose wbo initially bave fairly strong etbical standards.

As noted above, organizations operating in certain industries tend to bebave unetbically. Certain indus- try cultures may predispose organizations to develop cultures tbat encourage tbeir members to select unetbical acts. If an organization's major competitors in an industry are performing well, in part as a result of unetbical activities, it becomes difficult for organ- izational members to cboose only unetbical actions, and tbey may regard unetbical actions as a standard of industry practice. Sucb a scenario results in an organizational culture tbat serves as a strong precipi- tant to unetbical actions. Tbe next section looks at tbe organizational culture-etbical bebavior relation- sbip.

Organizational culture and ethical behavior

"Do organizations vary in tbe 'ethical climates' tbey establish for tbeir members? Tbe answer to tbe question is "yes," and it is increasingly clear tbat tbe etbical tone or climate of organizations is set at tbe top. Wbat top managers do, and tbe culture tbey establisb and reinforce, makes a big difference in tbe way lower-level employees act and in tbe way tbe organization as a wbole acts wben etbical dilemmas are faced. For example, tbere was no doubt in anyone's mind at Jobnson & Jolmson wbat to do wben tbe infamous Tylenol poisoning took place. Company executives immediately pulled tbeir pro- duct from tbe marketplace — tbey knew tbat "die J & J way" was to do tbe rigbt tbing regardless of its cost. Wbat tbey were implicitly saying was tbat tbe etbical framework of tbe company required tbat tbey act in good faitb in tbis fasbion.

Tbe etbical climate of an organization is tbe sbared set of understandings about wbat is correct bebavior and bow etbical issues will be bandied. Tbis climate sets tbe tone for decision making at all levels and in all circumstances. Some of tbe factors tbat may be empbasized in different etbical climates of organizations are (Hunt, 1991; Scbneider and Rentscb, 1991):

* Personal self-interest * Company profit * Operating efficiency * Individual friendsbips * Team interests * Social responsibility * Personal morality * Rules and standard procedures * Laws and professional codes

As suggested by tbe prior list, tbe etbical climate of different organizations can empbasize different tbings. In tbe Jobnson & Jobnson example just cited, tbe etbical climate supported doing tbe rigbt tbing due to social responsibility — regardless of tbe cost. In otber organizations — perbaps too many — con- cerns for operating efficiency may outweigb social considerations wben similarly difficult decisions are faced.

Wben tbe etbical climate is not clear and positive, etbical dilemmas will often result in unetbical bebavior. In sucb instances, an organization's culture also can predispose its members to bebave unetbi- cally. For example, recent researcb bas found a relationsbip between organizations witb a bistory of violating tbe law and continued illegal bebavior (Baucus and Near, 1991). Tbus, some organizations bave a culture tbat reinforces illegal activity. In addition, some firms are known to selectively recruit and promote employees wbo bave personal values consistent witb illegal bebavior, firms also may socialize employees to engage in illegal acts as a part of tbeir normal job duties (Conklin, 1977; Geis, 1977). For instance, in bis account of cases concern- ing price fixing for beavy electrical equipment, Geis noted tbat General Electric removed a manager wbo refused to discuss prices witb a competitor from bis job and offered bis successor tbe position witb tbe understanding tbat management believed be would bebave as expected and engage in price-fixing activi- ties (Geis, 1977, p. 124; Baucus and Near, 1991).

Pressure, opportunity, and predisposition can all lead to unetbical activities; bowever, organizations must still take a proactive stance to promote an etbical climate. The final section provides some useful suggestions available to organizations for creating a more etbical climate.

challenge of Ethical Behavior in Organizations 511

Promoting an ethical climate: Some suggestions and strategies

Recent literature bas suggested several strategies for promoting etbical bebavior in organizations (Adler and Bird, 1988; Burns, 1987; Harrington, 1991; Raelin, 1987; Stead etal, 1990). First, cbief executives sbould encourage etbical consciousness in tbeir organizations from tbe top down — sbowing tbey support and care about etbical practices. Second, formal processes sbould be used to support and reinforce etbical bebavior. For example, internal regulation may involve tbe use of codes of corporate ethics, and tbe availability of appeals processes. Finally, it is recommended tbat tbe pbilosopbies of top managers as well as immediate supervisors focus on tbe institutionalization of etbical norms and practices tbat are incorporated into all organizational levels.

Tbe pbilosopbies of top managers as well as immediate supervisors represent a critical organiza- tional factor influencing tbe etbical bebavior of employees (Stead et al, 1990). Researcb over a period of more tban twenty-five years clearly supports tbe conclusion tbat tbe etbical pbilosopbies of manage- ment bave a major impact on tbe etbical bebavior of tbeir followers — employees (Arlow and Ulricb, 1980; Baumbart, 1961; Brenner and Molander, 1977; Carroll, 1978; Hegarty and Sims, 1978, 1979; Posner and Scbmidt, 1984; Toucbe Ross, 1988; Vitell and Festervand, 1987; Worrell etal, 1985).

Nielsen (1989) bas stressed tbe importance of managerial bebavior in contributing to etbical or unetbical bebavior. According to Nielsen, managers bebaving unetbically contrary to tbeir etbical pbi- losopbies represents a serious limit to etbical reason- ing in tbe firm. Mucb of tbe researcb cited in tbe above paragrapb implicidy and explicitly states tbat etbical pbilosopbies will bave little impact on em- ployees' etbical bebavior unless tbey are supported by managerial bebaviors tbat are consistent witb tbese pbilosopbies. Managers represent significant otbers in tbe organizational lives of employees and as sucb often bave tbeir bebavior modeled by em- ployees.

One of tbe most basic of management principles states tbat if you desire a certain bebavior, reinforce i t No doubt, bow etbical bebavior is perceived by

individuals and reinforced by an organization deter- mines tbe kind of etbical bebavior exbibited by employees. As a result, if business leaders want to promote etbical bebavior tbey must accept more responsibility for establisbing tbeir organization's reinforcement system. Researcb in etbical bebavior strongly supports tbe conclusion tbat if etbical bebavior is desired, tbe performance measurement, appraisal and reward systems must be modified to account for etbical bebavior (Hegarty and Sims, 1978, 1979; Trevino, 1986; Worrell et al, 1985). According to Nielsen (1988, p. 730):

In many cases, mangers choose to do, go along with or ignore the unethical . . . because they want to avoid the possibility of punishments [or] to gain rewards . . .

Organizations aiid tbeir managers must under- stand tbat tbe above recommendations are key com- ponents in tbe development and maintenance of an etbically-oriented organizational culture. Organiza- tions can also enbance an etbically-oriented culture by paying particular attention to principled organi- zational dissent. Principled organizational dissent is an important concept linking organizational culture to etbical bebavior. Principled organizational dissent is tbe effort by individuals in tbe organization to protest tbe status quo because of tbeir objection on etbical grounds, to some practice or policy (Grabam, 1986). Organizations committed to promoting an etbical climate sbould encourage principled organi- zational dissent instead of punisbing sucb bebavior.

Organizations sbould also provide more etbics training to strengtben tbeir employees' personal etbical framework. Tbat is, organizations must de- vote more resources to etbics trainii^ programs to belp its members clarify tbeir etbical frameworks and practice self-discipline wben making etbical decisions in difficult circumstances. Wbat follows is a useful seven-step cbecklist tbat organizations sbould use to belp tbeir employees in dealing witb an etbical dilemma (Scbermerbom, 1989; Otten, 1986):

(1) Recognize and clarify tbe dilemma. (2) Get all tbe possible facts. (3) List your options — all of tbem. (4) Test eacb option by asking: "Is it legal? Is it

rigbt? Is it beneficial?"

512 Ronald R. Sims

(5) Make your decision. (6) Double check your decision by asking: "How

would I feel if my family found out about this? How would I feel if my decision was printed in the local newspaper?"

(7) Take action.

An effective organizational culture should en- courage ethical behavior and discourage unethical behavior. Admittedly, ethical behavior may "cost" the organization. An example might be the loss of sales when a multinational firm refuses to pay a bribe to secure business in a particular country. Certainly, individuals might be reinforced for be- having unethically (particularly if they do not get caught). In a similar fashion, an organization might seem to gain from unethical actions. For example, a purchasing agent for a large corporation might be bribed to purchase all needed office supphes from a particular supplier. However, such gains are often short-term rather than long-term in nature. In the long run, an organization cannot operate if its prevailing culture and values are not congruent with those of society. This is just as true as the observation that, in the long run, an organization cannot survive unless it produces goods and services that society wants and needs. Thus an organizational culture that promotes ethical behavior is not only more com- patible with prevailing cultural values, but, in fact, makes good sense.

Although much remains to be learned about why ethical behavior occurs in organizations and creating and maintaining organizational cultures that en- courage ethical behavior, organizations can benefit from the following suggestions:

*• Be realistic in setting values and goals regard- ing employment relationships. Do not pro- mise what the organization cannot deliver.

** Encourage input throughout the organization regarding appropriate values and practices for implementing the cultures. Choose values that represent the views of employees at all levels of the organization.

** Do not automatically opt for a "strong" cul- ture. Explore methods to provide for diversity and dissent, such as grievance or complaint mechanisms or other internal review proce- dures.

** Insure that a whistle-blowing and/or ethical

concerns procedure is established for internal problem-solving (Harrington, 1991).

** Provide ethics training programs for all em- ployees. These programs should explain the underlying ethical and legal (Drake and Drake, 1988) principles and present practical aspects of carrying out procedural guidelines.

** Understand that not all ethical situations are clear-cut. Like many basic business situations, the organization should recognize that there are ambiguous, grey areas where ethical trade- offs may be necessary. More importantly, some situations have no simple solution (Cooke, 1991).

** Integrate ethical decision-making into the performance appraisal process.

In conclusion, even though ethical problems in organizations continue to greatly concern society, organizations, and individuals, the potential impact that organizational culture can have on ethical behavior has not really been explored (Hellreigel et al., 1989). The challenge of ethical behavior must be met by organizations if they are truly concerned about survival and competitiveness. What is needed in today's complicated times is for more organiza- tions to step forward and operate with strong, posi- tive, and ethical cultures. Organizations have to ensure that their employees know how to deal with ethical issues in their everyday work lives. As a result, when the ethical climate is clear and positive, every- one will know what is expected of them when inevitable ethical dilemmas occur. This can give employees the confidence to be on the lookout for unethical behavior and act with the understanding that what they are doing is considered correct and will be supported by top management and the entire organization.

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challenge of Ethical Behavior in Organizations 513

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College of William and Mary, Craduate School of Business Administration,

Williamsburg, Virginia 23185, U.SA.