Abstract

Management plays an important role in reinforcing ethics in organizations. To support this aim, managers must use incentive and goal programs in ethical ways. This study examines experimentally the potential ethical costs associated with incentive-driven and goal-induced employee behavior from a managerial perspective. In a quasi-experimental setting, 243 MBA students with significant professional work experience evaluated a hypothetical employee’s ethical behavior under incentive pay systems modeled on a business case. In the role of the employee’s manager, participants evaluated the ethicality of the employee’s incentive-driven and goal-induced ethical/unethical behavior and the outcomes of behavior, with consequences that were either favorable or unfavorable to the organization. The results indicated that participants discounted the ethical considerations of incentive-driven and goal-induced behavior when consequences were favorable to the organization. Participants’ morals and outcome orientations were also significantly related to their ethical judgments and intentions to intervene. The implications of these findings for research and practice are discussed.