A genuine commitment to ethics and compliance (E&C) programs means that top management adopt them for what they represent and not for other purposes. Only then can they truly build socially responsible behavior and a successful and sustainable business, as stated in the latest international standard for compliance management practice (ISO 37301:2021), which we found to be consistent with a new business narrative as conceptualized in Freeman's work. However, it also requires that top managers place a moral value on these (...) practices, rather than simply using them for instrumental reasons. Building on Kohlberg's six stages of moral development as applied to managers' moral thinking, this manuscript offers a model to explain how top managers' moral valuing of these practices varies along a moral reasoning continuum, resulting in four distinct modes. It also theorizes that each mode of moral valuing yields an archetype of E&C programs. It thus offers a new approach that contributes to the business ethics and management literature by incorporating a morally grounded perspective on the adoption and implementation of E&C practices and how it might shape their features and characteristics. It also aims to improve professional practice and business contributions to Freeman's ideas through genuine ethics‐based E&C programs. (shrink)

This review offers a cautious acceptance ofthe Multidimensional Ethics Scale (MES) developed by Robin, Gordon, Jordan and Reiden-bach. While the contribution of the MES to future empirical research of individuals’ moral reasoning is welcomed, a number of reservations or criticisms are raised regarding theory confusion, instrument confusion, and fears arising when using the MES. I conclude that the MES is a valuable compliment to existing moral reasoning instruments - the Moral Judgment Interview and the Defining Issues Test - but not (...) a replacement of these instruments. (shrink)

A growing number of researchers in the business ethics field have used scenarios as a data gathering technique in their empirical investigations of ethical issues. This paper offers a review and critique of 26 studies that have utilized scenarios to elicit inferences of ethical reasoning, decision making, and/or intended behavior from managerial or student populations. The use of a theoretical foundation, the development of hypotheses, various characteristics germane to the use of scenarios, population and sampling issues, and the use of (...) statistical measures are explored and assessed. In the interest of improving scenario-based research, ten recommendations are presented to guide future scenario research. (shrink)

This research builds on previous investigations seeking to understand how individuals reason about moral problems. Our research includes a preliminary investigation about Millennials and a cross‐generational analysis using secondary research data to understand this emerging generation's moral reasoning and assess trends in moral reasoning over time. This study addresses content‐bias in moral reasoning by using a new instrument with business‐based dilemmas, the Moral Recognition Interview, based on the well‐established moral reasoning framework of Lawrence Kohlberg. Results show that the Millennials in (...) this study exhibit differences in moral reasoning based on gender, intelligence, work experience, and academic major, however not necessarily in an expected manner. Differences in moral reasoning were found when the context or “story pull” of the ethical dilemmas presented is considered. In addition, a comparison to other studies shows that business student Millennials tend to reason at lower levels of cognitive moral reasoning than non‐business college students, as well as college students in the 1960s–1970s (Baby Boomers) and in the 1980s–1990s (Generation Xers). (shrink)

Relying on an expanded view of leadership and the moral reasoning framework developed by Lawrence Kohlberg (1981), this study explores the moral reasoning of the chief executive officers at the 11 largest automobile manufacturers in the world. Using the CEO's letter to their stakeholders found in the organizations' annual social responsibility reports, the CEOs' moral reasoning is compared to other managers' moral reasoning, and the moral reasoning exhibited within the CEO group is analyzed for differences due to regional location. Contrary (...) to conventional understanding based on prior research, the CEOs in our sample did not exhibit moral reasoning at a higher level than a cross section of managers but there were differences within the sample of CEOs when looking at nationality. Implications of these results for CEOs, managers, academics, and others are explored. (shrink)

The introduction and validation of a new instrument, The Moral Reasoning Inventory, designed to measure an individuals' moral reasoning (MR) in response to two moral dilemmas within a business setting is the subject of this article. The instrument consists of two moral dilemma scenarios with eight MR statements. Two measurement scales were used for analyzing patterns of individual responses: the strength of belief in the reasons and the importance of those reasons for resolving the dilemma. Managers enrolled in a part-time (...) MBA program were administered the new instrument. Data analysis clearly supported the effectiveness of the instrument to differentiate patterns of consistency in MR within decision groups. (shrink)

As ethical consultancy to business develops what are its principles, its methods and its possible pitfalls? The author is Professor of Business Ethics at the Netherlands School of Business, Nijenrode, and Chairman of the European Business Ethics Network.

The purpose of this work is to elaborate an empirically grounded mathematical model of the magnitude of consequences component of “moral intensity” (Jones, Academy of Management Review 16 (2),366, 1991) that can be used to evaluate different ethical situations. The model is built using the analytical hierarchy process (AHP) (Saaty, The Analytic Hierarchy Process , 1980) and empirical data from the legal profession. One contribution of our work is that it illustrates how AHP can be applied in the field of (...) ethics. Following a review of the literature, we discuss the development of the model. We then illustrate how the model can be used to rank-order three well-known ethical reasoning cases in terms of the magnitude of consequences. The work concludes with implications for theory, practice, and future research. Specifically we discuss how this work extends the previous work by Collins ( Journal of Business Ethics 8 , 1, 1989) regarding the nature of harm variable. We also discuss the contribution this work makes in the development of ethical scenarios used to test hypotheses in the field of business ethics. Finally, we discuss how the model can be used for after-action review, contribute to organizational learning, train employees in ethical reasoning, and aid in the design and development of decision support systems that support ethical reasoning. (shrink)

The purpose of this work is to elaborate an empirically grounded mathematical model of the magnitude of consequences component of "moral intensity", 366, 1991) that can be used to evaluate different ethical situations. The model is built using the analytical hierarchy process and empirical data from the legal profession. One contribution of our work is that it illustrates how AHP can be applied in the field of ethics. Following a review of the literature, we discuss the development of the model. (...) We then illustrate how the model can be used to rank-order three well-known ethical reasoning cases in terms of the magnitude of consequences. The work concludes with implications for theory, practice, and future research. Specifically we discuss how this work extends the previous work by Collins regarding the nature harm variable. We also discuss the contribution this work makes in the development of ethical scenarios used to test hypotheses in the field of business ethics. Finally, we discuss how the model can be used for after-action review, contribute to organizational learning, train employees in ethical reasoning, and aid in the design and development of decision support systems that support ethical reasoning. (shrink)

Four real-life dilemma cases collected from Hong Kong managers were included, along with two other cases previously used by Weber (1991), in an instrument designed to assess ethical reasoning capacity. This was completed by 86 part-time post-graduate students, all of whom were managers with at least four years working experience. Respondents'' measured ethical reasoning capacity appeared to be at least as high as comparable samples in the U.S.A. The mean ethical reasoning stage varied between cases. Contrary to expectations, the unfamiliarityper (...) se of a case did not affect ethical reasoning which instead tended toward higher measured stages when issues of public hazard or environmental pollution were introduced, and toward lower measured stages where personal or family finances were at stake. Two methodological points were made signalling the need for caution in research of this kind. First, because of reservations about the adequacy of the standard Kohlbergian model of ethical reasoning development, a scoring guide based on a revised Kohlbergian model of ethical reasoning was used to analyze the replies, rendering comparisons with other samples inexact. Second, the possible phenomenon of quasi Stage Five reasoning renders problematic the identification of true Stage Five ethical reasoning. (shrink)

This article examines how business students route themselves through the process of cognitive moral development (CMD) to arrive at a more autonomous level of CMD when there is an impetus to do so. In this study, two groups were given Rest’s Defining Issues Test; half the test 1 week and half three weeks later. In between, one group viewed a film of Milgram’s obedience study as a stimulus towards a more autonomous level of CMD. The results of the analysis indicate (...) that viewing the Milgram study produced a positive response regarding subjects’ level of autonomous CMD. However, the response was not uniform across the subject pool. Females showed a greater consistent significant positive response to viewing Milgram while male subjects varied their response contingent upon their functional area of study. While subjects’ functional area of study alone made little difference in the results, when taken in conjunction with gender, significant differences were found between groups. Thus, researchers should take care when investigating differences between subjects’ area of study since gender differences may be present even within an apparently homogenous population-like business students. (shrink)

Abstract:This paper develops a framework for examining decision making about ethical issues and tests the applicability of a social contract perspective. Using two separate samples of students and salespeople, we determine that community members (salespeople) tend to judge a potentially unethical act to constitute a violation of an implicit social contract and non-community members (students) do not. Also, consistent with the emphasis on context specificity of integrative social contracts theory, situational variables influence perceptions of ethicality for the community members, but (...) do not affect the perceptions of individuals outside the community. The study finds considerable support for the use of a social contractarian perspective in the study of decision-making processes about ethical issues. (shrink)

The substantial work on cognitive moral development (CMD) by Lawrence Kohlberg and James Rest popularized the use of this construct in the literature on business ethics. This construct has been prominently used in models attempting to explain ethical/unethical behavior in management, marketing, and accounting, even though Kohlberg did not intend for the construct to be used in that manner. As a predictor of behavior, CMD has been attacked on the theoretical level, and its empirical performance has been weak. This article (...) uses another established construct, which seems to satisfy the central criticisms of CMD, as a means of testing those complaints. The comparative multidimensional ethics scale (MES) substantially outperforms CMD, operationalized using Rest’s Defining Issues Test, in every test. These results seem to suggest that other options perform better than CMD when the purpose is to model ethical/unethical behavior or even ethical judgment. (shrink)

This comparative field study evaluated the choices made by U.S., Portuguese, and Hong Kong Chinese evening MBA and graduating university business students when resolving business-related moral dilemmas. The authors developed hypotheses at the country level based on Hofstede’s ratings of each country’s national culture dimensions of power distance, uncertainty avoidance, individualism, and masculinity. The more individualistic U.S. respondents resolved the dilemmas with choices indicating less self-interest and more concern for unidentified others than did their Portuguese and Hong Kong Chinese counterparts, (...) who are from more collectivist societies. The authors discuss implications for future cross-cultural research on business dilemmas and for cooperative interactions among managers from these and other countries. (shrink)

This comparative field study evaluated the moral reasoning used by U.S. and Belizean business students in resolving business-related moral dilemmas. The Belizeans, citizens of a less-developed country with Western heritage and a values-based education system, revolved the dilemmas using higher stages of moral judgment than did the U.S. business students.

The decision making process is an important aspect of the managerial function that is becoming increasingly complex due to technological and global impacts. It is essential, therefore, to understand why various managers approach the decision making process differently. One area that is related to how managers perceive and process the information that is associated with decision making, is that of decision style.It is not enough, however, to explore decision style in isolation, as some of the decisions that managers make often (...) entail ethical components concerning the ability to balance the interests of diverse groups. Moral reasoning is therefore important for every manager, and could impact the decision style that is employed by such managers. The relationship between managerial decision style and moral development is one that could provide unique insights into the area of decision making, yet it is an area that has remained relatively unexplored. (shrink)

Given the comprehensive influence of mindfulness on human thought and behavior, and the importance of moral reasoning in business decisions, we examine the role of mindfulness as an antecedent to moral reasoning through two studies. In Study 1, we propose and test a theoretically derived model that links mindfulness and moral reasoning, mediated by compassion and egocentric bias using a survey design. In Study 2, we examine whether mindfulness training enhances moral reasoning using an experimental design with graduate students of (...) business management. The findings of Study 1 substantiate the positive association of mindfulness with moral reasoning. We found that this relationship is fully mediated by compassion and egocentric bias. The results of Study 2 suggest that mindfulness meditation training has a positive impact on individuals' states of mindfulness, compassion, and moral reasoning, and decreases egocentric bias. We relate the findings of the study with contemporary neurological research and discuss the theoretical, pedagogical, and managerial implications. (shrink)

The last years have seen a surge of scandals in financial intermediation. This article argues that the agency structure inherent to most forms of financial intermediation gives rise to conflicts of interest. Though this does not excuse scandalous behavior it points out market imperfections. There are four types of conflicts of interest: personal-individual, personal-organizational, impersonal-individual, and finally, impersonal-organizational conflicts. Analyzing recent scandals we find that all four types of conflicts of interest prevail in financial intermediation.

Increased globalisation has also seen increased scrutiny of corporate behaviour by the communities. Clearly managers are under increased pressure from stakeholders not only to outperform their competitors, but also are expected to do so in an ethical manner. In order to act ethically an individual is expected to have a well-developed moral imagination and moral reasoning. Literature on ethical reasoning research indicates a positive relationship between higher levels of moral reasoning and ethical behaviour. This paper presents the findings of a (...) study of the moral reasoning/moral development of managers working in large manufacturing enterprises situated in the state of Punjab in India. Kohlberg’s theory of Cognitive Moral Development forms the basis of the study. Moral Judgement Interview (MIG) developed by Weber, on the basis of Kohlberg’s theory was used for the study. Moral Reasoning Scores were calculated using Abbreviated Scoring Guide. More than half of the managers scored at post-conventional level of reasoning while assessing the moral dilemmas. The reasoning scores varied for the three dilemmas. (shrink)

Increased globalisation has also seen increased scrutiny of corporate behaviour by the communities. Clearly managers are under increased pressure from stakeholders not only to outperform their competitors, but also are expected to do so in an ethical manner. In order to act ethically an individual is expected to have a well-developed moral imagination and moral reasoning. Literature on ethical reasoning research indicates a positive relationship between higher levels of moral reasoning and ethical behaviour. This paper presents the findings of a (...) study of the moral reasoning/moral development of managers working in large manufacturing enterprises situated in the state of Punjab in India. Kohlberg's theory of Cognitive Moral Development forms the basis of the study. Moral Judgement Interview developed by Weber, on the basis of Kohlberg's theory was used for the study. Moral Reasoning Scores were calculated using Abbreviated Scoring Guide. More than half of the managers scored at post-conventional level of reasoning while assessing the moral dilemmas. The reasoning scores varied for the three dilemmas. (shrink)

In this article it is argued that much research into processes of moral learning and development in organisations has been conducted under somewhat controlled conditions, and that these do not permit testing of individuals' thought and action under more extreme circumstances. Therefore in practice one needs to acknowledge the effect of the actual organisational context. Three aspects or issues concerning the effect of this context on interventions are identified: first, systemic factors, especially corporate culture, impact on individual behaviour; second, consultants (...) and developers may have difficulty when working with people at different levels of moral development; and, third, differential influence among members of an organisation affects the possibility of, and the enactment of, moral development programmes.Each of these considerations is discussed while employing conceptualisations based on Kohlberg's ideas. However the question of influence and power is not one which has been addressed to any significant extent by writers in this particular area. The essential argument in this article is that this must be done if the full potential of research into moral development in organisations is to be realised. (shrink)

The possible relationship between widespread unauthorized copying of microcomputer software (also known as software piracy) and level of moral judgment is examined through analysis of over 350 survey questionnaires that included the Defining Issues Test as a measure of moral development. It is hypothesized that the higher one''s level of moral judgment, the less likely that one will approve of or engage in unauthorized copying. Analysis of the data indicate a high level of tolerance toward unauthorized copying and limited support (...) for the hypothesis. The most plausible explanation for these findings is that software copying is perceived as an issue of low moral intensity. This study calls into question the software industry''s strategy of concentrating exclusively on institutional compliance with copyright rules, rather than working to raise the perceived moral intensity about software piracy at the individual level. As long as the issue remains low in moral intensity, the industry cannot expect significant shifts in copying behaviors. Individuals must become more aware of and concerned about the nature and magnitude of harm to society and to the rightful copyright owners from unauthorized copying before their attitudes and behaviors come to reflect higher levels of moral judgment. (shrink)

This study constitutes a contribution to the discussion about moral reasoning in business. Kohlberg’s (1971, in Cognitive Development and Epistemology (Academic Press, New York), 1976, in Moral Development and Behavior: Theory and Research and Social Issues (Holt, Rienhart and Winston, New York)) cognitive moral development (CMD) theory is one explanation of moral reasoning. One unresolved debate on the topic of CMD is the charge that Kohlbergian-type CMD theory is gender biased. This research puts forth the proposal that the issue may (...) be elucidated by exposing an ambiguity in “gender” (Borna and White: 2003, Journal of Business Ethics 47, 89–99; Gentile: 1993, Psychological Science 4(2), 120–122; Unger: 1979, American Psychologist 34(11), 1085–1094). We use the Sociomoral Reflective Objective Measure (SROM) to measure CMD and the Bem Sex Role Inventory (BSRI) to measure gender as a psychosocial concept, rather than as a biological classification. The results of our study indicate that high femininity, measured as a psychosocial attribute, is associated with significantly lower Kohlbergian-type CMD scores among business practitioners. Sex moderates the effect of gender on CMD, but only indirectly. Our research also reveals that education plays a significant moderating role in the relationship between gender and moral reasoning. In addition, age has a significant direct effect on CMD scores of business practitioners. (shrink)

There is a tendency in the business ethics literature to think of ethics in restrictive terms: what one should not do, and how to control this. Drawing on Lawrence Kohlberg''s theory of moral development, the paper focuses on, and draws attention to, another more positive aspect of ethics: the capacity of ethics to inspire and empower individuals, as well as groups. To understand and facilitate such empowerment, it is argued that it is necessary to move beyond Kohlberg''s justice reasoning so (...) as to appreciate the value and importance of feeling and care. Accordingly, we draw upon case study material to review the meaning of Kohlberg''s higher stages — 5, 6 and 7 — to question the meaning of ethical reasoning. With such deeper understanding of particular ethical codes or practices, it is thought that members of organisations may come closer to thespirit, as opposed to the letter, of ethical conduct in organisations. This, we argue, is consistent with the degree of trust and integrity demanded by leaner, post-bureaucratic ways of organizing and conducting business as well as being personally beneficial to the people involved. (shrink)

Empirical analyses of the ethics of corporations with the aim to improve the state of corporate ethics are rare. This paper develops an integrated, normative model of corporate ethics by conceptualizing the ethical quality of organizations and by relating this contextual quality to various expressions of immoral behavior. This so-called Ethics Qualities Model for organizations, which contains 21 ethical qualities, allows one to assess the ethical content of institutional groups of individuals. A proper conceptualization is highly relevant both for the (...) empirical corroboration of business ethics theories and for managerial purposes, such as judging individual and group performance or informing external stakeholders. The empirical applicability of the model is illustrated by an explorative case study of a large, globally operating financial institution. This case-study demonstrates that the corporate ethical qualities differ with respect to their perceived optimality as well as to their estimated impact on (un)ethical conduct. The various results provide managers with many clues to understand their organization and to take effective measures to improve the ethical content of their organization. (shrink)

The first issue of BusinessEthics Quarterlyappeared five years ago. This article classifies the content of the 141 articles that have appeared since that time along 18 dimensions, and 118 categories within those dimensions, to determine trends within the discipline. The major trend appears to be a shift in focus towards the increased discussion of a new approach/paradigm for the field, and towards a normative/descriptive interface of the theory. The major problem seems to be a lack of explicit conceptual definition and (...) beginning empirical effort to support that new focus, which may thus prove unsustainable over time. (shrink)

This article addresses the issue of moral compunction among a sample of senior managers set against the background of their routine organizational participation. In considering what factors influence their moral sensibilities these managers were interviewed using an approach designed to elicit their perceptions concerning both the ethical and commercially imperative dimensions of their working lives. The qualitative data resulting from this inquiry, while tentative, indicates the primacy of the normative appeal of shareholder value, conditioned by the exigencies of engagement in (...) corporate bureaucracies, including the maintenance of career and livelihood responsibilities. These conclusions indicate the magnitude of the obstacle that the normative business ethics project requires to overcome in order to fulfil its promise. (shrink)

This article addresses the issue of moral compunction among a sample of senior managers set against the background of their routine organizational participation. In considering what factors influence their moral sensibilities these managers were interviewed using an approach designed to elicit their perceptions concerning both the ethical and commercially imperative dimensions of their working lives. The qualitative data resulting from this inquiry, while tentative, indicates the primacy of the normative appeal of shareholder value, conditioned by the exigencies of engagement in (...) corporate bureaucracies, including the maintenance of career and livelihood responsibilities. These conclusions indicate the magnitude of the obstacle that the normative business ethics project requires to overcome in order to fulfil its promise. (shrink)

Although the AICPA Code of Professional Conduct emphasizes the importance of education in ethics, very little is known about how and when the Code and the topic of ethics can be presented to enhance the effectiveness of ethics-oriented education. The purpose of this research was to provide preliminary evidence about the ethical development of students prior to, and immediately following, such courses. We found that: (1) accounting students, after taking an auditing course which emphasized the AICPA Code, reasoned at higher (...) levels than students who had not taken the course; (2) there were no differences in moral reasoning levels when accounting and non-accounting majors were compared prior to an auditing course; and (3) there was a significant relationship between the Seniors' levels of ethical development and the choice of an ethical versus unethical action. It was concluded that an auditing course emphasizing the 'spirit' of the Code can have a positive impact on the ethical behaviour of some of the future members of the accounting profession. (shrink)

Every time another corporate scandal captures media headlines, the ‘bad apple vs. bad barrel’ discussion starts anew. Yet this debate overlooks the influence of the broader societal context on organizational behavior. In this article, we argue that misbehaviors of organizations (the ‘barrels’) and their members (the ‘apples’) cannot be addressed properly without a clear understanding of their broader context (the ‘larder’). Whereas previously, a strong societal framework dampened the practical application of the Homo economicus concept (business actors as perfectly rational (...) and egocentric utility-maximizing agents without any moral concern), specialization, individualization and globalization led to a business world disembedded from broader societal norms. This emancipated business world promotes a literal interpretation of Homo economicus among business organizations and their members. Consequently, we argue that the first step toward ‘healthier’ apples and barrels is to sanitize the larder, that is, adapt the framework in which organizations and their members evolve. (shrink)

Every time another corporate scandal captures media headlines, the ‘bad apple vs. bad barrel’ discussion starts anew. Yet this debate overlooks the influence of the broader societal context on organizational behavior. In this article, we argue that misbehaviors of organizations (the ‘barrels’) and their members (the ‘apples’) cannot be addressed properly without a clear understanding of their broader context (the ‘larder’). Whereas previously, a strong societal framework dampened the practical application of the Homo economicus concept (business actors as perfectly rational (...) and egocentric utility‐maximizing agents without any moral concern), specialization, individualization and globalization led to a business world disembedded from broader societal norms. This emancipated business world promotes a literal interpretation of Homo economicus among business organizations and their members. Consequently, we argue that the first step toward ‘healthier’ apples and barrels is to sanitize the larder, that is, adapt the framework in which organizations and their members evolve. (shrink)

Softlifting, or the illegal duplication of copyrighted software by individuals for personal use, is a serious and costly problem for software developers and distributors. Understanding the factors that determine attitude toward softlifting is important in order to ascertain what motivates individuals to engage in the behavior. We examine a number of factors, including personal moral obligation (PMO), perceived usefulness, and awareness of the laws and regulations governing software acquisition and use, along with facets of personal self-identity that may play a (...) role in the development of attitudes and therefore intentions regarding this behavior. These factors are examined across multiple settings expected to be pertinent to our survey respondents: home, work and school. Personal moral obligation and perceived usefulness are significant predictors of attitude across all settings. Past behavior is a significant predictor of intention across all settings, and a significant predictor of attitude in the home setting. We find evidence that awareness of the law causes a less favorable evaluation of softlifting in the school setting only, but has little effect in the home and work settings. As in previous studies, attitude is a significant predictor of intent. We do not find indications that one’s personal self-identity influences one’s attitude towards the behavior and the intention to perform it, except in the case of legal identity, where marginally significant effects are found in the work environment. (shrink)

This paper compares and contrasts two distinct techniques for measuring moral judgment: The Moral Judgment Interview and the Defining Issues Test. The theoretical foundations, accompanying advantages and limitations, as well as appropriate usage of these methodologies are discussed. Adaptation and use of the instruments for business ethics research is given special attention.

This paper reports on the development of a research instrument designed to explore ethical reasoning in a tax context. This research instrument is a version of the Defining Issues Test (DIT) originally developed by Rest [1979a, Development in Judging Moral Issues (Univer sity of Minnesota Press, Minneapolis, MN); 1979b, Defining Issues Test (University of Minnesota Press, Minneapolis, MN)], but adapted to focus specifically on the environment encountered by tax practitioners. The paper explores reasons for developing a context-(and profession-) specific test, (...) and details the manner in which this was undertaken. The study on which it is based aims to compare the reasoning of tax practitioners in the taxspecific context and in the general social context covered by the original DIT, and to compare this with the reasoning of non-specialists in these two contexts. The paper therefore also considers the issues that arise when using such tests to compare reasoning in different domains or to compare groups. The focus on instrument development to measure ethical reasoning in a specific domain will contribute to the literature on research methods in the area of the DIT and will facilitate cross-study comparisons. (shrink)

This paper reports on the development of a research instrument designed to explore ethical reasoning in a tax context. This research instrument is a version of the Defining Issues Test originally developed by Rest [1979a, Development in Judging Moral Issues ; 1979b, Defining Issues Test ], but adapted to focus specifically on the environment encountered by tax practitioners. The paper explores reasons for developing a context- specific test, and details the manner in which this was undertaken. The study on which (...) it is based aims to compare the reasoning of tax practitioners in the taxspecific context and in the general social context covered by the original DIT, and to compare this with the reasoning of non-specialists in these two contexts. The paper therefore also considers the issues that arise when using such tests to compare reasoning in different domains or to compare groups. The focus on instrument development to measure ethical reasoning in a specific domain will contribute to the literature on research methods in the area of the DIT and will facilitate cross-study comparisons. (shrink)

How tax practitioners approach ethical dilemmas remains generally unexplored in academic literature. We use here Rest’s original Defining Issues Test (Development in judging moral issues. Minneapolis: University of Minnesota Press, 1979; Moral development. Advances in research and theory. New York: Praeger Publishers, 1986), combined with a tax context-specific test and in conjunction with a control group of non-tax specialists, to examine tax practitioners’ moral reasoning in a social and tax context. We investigate: (i) the effect of a tax context on (...) issues raised (finding that practitioners generally reason at lower levels than in social scenarios); (ii) whether the profession attracts people who reason at certain levels (finding that it does not); and (iii) whether practitioners are affected by training/socialization in their professional context (finding that that they are). (shrink)

According to agency theory, agents base their economic decisions on self-interests when adverse selection conditions exist. However, cognitive moral development theory predicts that ethics/morals may influence decision-makers not to behave egoistically. Rutledge and Karim (1999; Accounting, Organizations and Society 24(2), 173–184) find both the moral reasoning level of the managers and an adverse selection condition affect a manager’s project evaluation decisions significantly. Since prior studies have shown that national␣culture might influence the application of agency theory in project evaluation, this current (...) study uses a different moral development measurement to reexamine Rutledge and Karim’s hypotheses in another culture. A total of 73 Taiwanese executive MBA students with an average of 12.17 years work experience participated in this study. We found that both moral development level and adverse selection conditions significantly affect managers’ project continuance decisions. The interaction effect of these two factors indicates that, when adverse selection conditions exist, participants with a high level of moral development exhibit less of a tendency to continue an unprofitable project than those with a low level of moral development. With subjects from a different culture, our results confirm the findings of Rutldege and Karim. That is, the effects of moral development and adverse selection conditions on managers’ project continuance decisions are robust and can be generalized to different cultures. Implications of the findings of this study to multinational firms are also discussed. (shrink)

According to agency theory, agents base their economic decisions on self-interests when adverse selection conditions exist. However, cognitive moral development theory predicts that ethics/morals may influence decision-makers not to behave egoistically. Rutledge and Karim, 173-184) find both the moral reasoning level of the managers and an adverse selection condition affect a manager's project evaluation decisions significantly. Since prior studies have shown that national culture might influence the application of agency theory in project evaluation, this current study uses a different moral (...) development measurement to reexamine Rutledge and Karim's hypotheses in another culture. A total of 73 Taiwanese executive MBA students with an average of 12.17 years work experience participated in this study. We found that both moral development level and adverse selection conditions significantly affect managers' project continuance decisions. The interaction effect of these two factors indicates that, when adverse selection conditions exist, participants with a high level of moral development exhibit less of a tendency to continue an unprofitable project than those with a low level of moral development. With subjects from a different culture, our results confirm the findings of Rutldege and Karim. That is, the effects of moral development and adverse selection conditions on managers' project continuance decisions are robust and can be generalized to different cultures. Implications of the findings of this study to multinational firms are also discussed. (shrink)

Ethics researchers advise managers of organizations to link rewards and punishments to ethical and unethical behavior, respectively. We build on prior research maintaining that organizations operate at Kohlbergs stages of moral reasoning, and explain how the over-reliance on rewards and punishments encourages employees to operate at Kohlbergs lowest stages of moral reasoning. We advocate designing organizations as ethical communities and relying on different assumptions about employees in order to foster ethical reasoning at higher levels. Characteristics associated with ethical communities are (...) identified and AES Corporation and Semco S/A serve as examples of corporations exhibiting the design characteristics and assumptions of ethical organizations. (shrink)

Business and Society Review, Volume 127, Issue 1, Page 97-125, Spring 2022.