Although there is ample evidence that stock markets react negatively to unethical corporate behavior, our understanding of the mechanisms that shape variation in these reactions across different incidents of misconduct remains underdeveloped. We propose and test a framework for explaining this variation by focusing on the role of the media in disseminating initial information about misconduct. We argue that the signaling effects of this information are important for investors because corporations have strong incentives to limit the information they disclose about misconduct. More specifically, we hypothesize that investors are more likely to react negatively when the media presents clear and credible information that misconduct occurred, that the firm was responsible for it, and that the misconduct was the result of deeper organizational problems. We also predict that information which signals that a firm has restorative capacity tempers investor reactions when the media places blame for misconduct on the corporation rather than specific individuals. We test our hypotheses in a unique sample of 345 acts of corporate misconduct in five European countries. Our findings provide broad support for our hypotheses, and we discuss implications for research on corporate misconduct and the role of non-state actors in regulating unethical corporate behavior.

This presidential address to the Society for Business Ethics argues that business ethics rests upon the mistaken assumption that teaching and research in the field ought to aim at the incorporation of ethics into managerial decision making. An alternative to this Moral Manager Model is a Moral Market Model, in which the aim is to develop markets that produce ethical outcomes. The differences between the two models are discussed with reference to the themes of responsibility, participation, and relationships.

Social contract is rapidly becoming one of the significant alternatives for analyzing ethical issues in business. Contractarian approaches emphasizing consent as a means of justifying principles can provide needed context for rendering normative judgements concerning economic behaviors. Current research issues include developing tests of consent for both hypothetical and extant social contracts, and empirically testing the assumptions of the major contractarian approaches. Open questions include exploring the relationship between contractarian business ethics and other approaches, such as stakeholder management and virtue based ethics; and analysis of the intersection of contractarian approaches with the findings and assumptions of the field of moral psychology. Finally, the managerial utility of social contract based approaches needs to be explored with emphasis on identifying “translator” concepts.

The history of the practice of corporate social responsibility (CSR) has largely been limited to the twentieth century, with a focus on the United States. This paper provides a brief introduction to CSR practice from the nineteenth century through World War I in the United Kingdom, United States, Japan, India, and Germany. The relevance of nineteenth-century CSR to current debates and research regarding the motivations for CSR, the business cases for CSR, stakeholder management, political CSR, industry self-regulation, and income inequality are also discussed.

This article adds to the discussion of the legitimation of stakeholding, by studying the implications of investing financial assets, years of labor, community resources, or other such scarce goods in a corporation. It attempts to respond to those who argue that it is not possible for all stakeholders to be effectively represented in corporate governance and that if they were, this would undermine the well-being of the corporation.

Although business ethicists have theorized frequently about the virtues and vices of employee loyalty, the concept of loyalty remains loosely defined. In this article, we argue that viewing loyalty as a cognitive phenomenon—an attitude that resides in the mind of the individual—helps to clarify definitional inconsistencies, provides a finer-grained analysis of the concept, and sheds additional light on the ethical implications of loyalty in organizations. Specifically, we adopt the psychological contract perspective to analyze loyalty's cognitive dimensions, and treat loyalty as an individual-level construction of perceived reciprocal obligations. Based upon this perspective, we present a three-tiered framework of loyalty that provides a psychologically informed definition of the concept, specifies the variety of obligation types that loyalty can imply, and anticipates the potential for asymmetrical loyalty configurations between employers and employees. We use the framework to articulate moral issues associated with both symmetrical and asymmetrical loyalty configurations and discuss the implications of the framework for theory and practice.

Deliberative democratic theory, commonly used to explore questions of “political” corporate social responsibility (PCSR), has become prominent in the literature. This theory has been challenged previously for being overly sanguine about firm profit imperatives, but left unexamined is whether corporate contexts are appropriate contexts for deliberative theory in the first place. We explore this question using the case of Starbucks’ “Race Together” campaign to show that significant challenges exist to corporate deliberation, even in cases featuring genuinely committed firms. We return to the underlying social theory to show that this is not an isolated case: for-profit firms are predictably hostile contexts for deliberation, and significant normative and strategic problems can be expected should deliberative theory be imported uncritically to corporate contexts. We close with recent advances in deliberative democratic theory that might help update the PCSR project, and accommodate the application of deliberation to the corporate context, albeit with significant alterations.

Leadership and followership are unified in an interdependent relationship exemplified by the idea of teamwork. Ethical concerns are among the valuational elements essential to developing loyalty and trust in this relationship. However, because of their need to maintain power and distance, self-serving leaders may become detached from how their actions are perceived and reacted to by followers. This pattern can be especially damaging to teamwork when leaders continue to receive disprortionate rewards despite their poor performance, especially when coupled with organizational downsizing and layoffs. Implications are drawn regarding the ethics of equity, responsibility, and accountability in the exercise of authority and power.

Various authors advocate consideration of stakeholder value concerns in organizational decision making. Brenner and Cochran (1990, 1991) propose a stakeholder theory of the firm which contains several propositions and a stakeholder value matrix. In order to begin any stakeholder model validation, an approach is needed to measure stakeholder value and influence weights. We propose a multicriteria decision modeling approach, utilizing the analytic hierarchy process, to estimate stakeholder value matrix weights. This approach is illustrated using a simplified example and suggestions are made regarding the process needed to begin to validate the stakeholder theory of the firm.

In a commercial society, said Adam Smith, “every man becomes in some measure a merchant.” If Smith is right, what does that mean for the character of the society? This paper addresses the character forming effects of the market—and, specifically its impact on the “virtues.” There is a long tradition of viewing commerce as subversive of the virtues. In this view, the market is held to have legitimated the pursuit of narrow self-interest at the expense of social and civic obligations and moral restraints. But, as Albert Hirschman has shown, many Enlightenment moralists saw commercial society as a moralizing force. Which view is right? This paper examines how many of the character traits that we commonly call virtues are rewarded—and so presumably reinforced and diffused—by the market. In this way, the market (as it were by a hidden hand) strengthens its own foundations and reproduces a moral culture that is functional to its own needs.

Increasingly, global businesses are confronted with the question of complicity in human rights violations committed by abusive host governments. This contribution specifically looks at silent complicity and the way it challenges conventional interpretations of corporate responsibility. Silent complicity implies that corporations have moral obligations that reach beyond the negative realm of doing no harm. Essentially, it implies that corporations have a moral responsibility to help protect human rights by putting pressure on perpetrating host governments involved in human rights abuses. This is a controversial claim, which this contribution proposes to analyze with a view to understanding and determining the underlying conditions that need to be met in order for moral agents to be said to have such responsibilities in the category of the duty to protect human rights.

Biological, brain, and behavioral sciences offer strong and growing support for the virtue ethics account of moral judgment and ethical behavior in business organizations. The acquisition of moral agency in business involves the recognition, refinement, and habituation through the processes of reflexion and reflection of a moral sense encapsulated in innate modules for compassion, hierarchy, reciprocity, purity, and affiliation adaptive for communal life both in ancestral and modern environments. The genetic and neural bases of morality exist independently of institutional frameworks and social structures. The latter not only shape moral behaviors within circumscribed limits, they also imply a plurality and compartmentalization of roles which may enable or impede the habituation of virtue. Becoming a virtuous agent entails the practical refinement of predispositions in situ as a member of a community of practitioners rather than entailing a normative ethical educational project seeking an intellectual resolution of abstract moral questions.

This essay discusses the place of business principles and of moral sentiments in economic success, and examines the role of cultures in influencing norms of business behavior. Two presumptions held in standard economic analysis are disputed: the rudimentary nature of business principles (essentially restricted, directly or indirectly, to profit maximization), and the allegedly narrow reach of moral sentiments (often treated to be irrelevant to business and economics). In contrast, the author argues for the need to recognize the complex structure of business principles and the extensive reach of moral sentiments by using theoretical considerations, a thorough analysis of Adam Smith’s work, and a careful interpretation of Japan’s remarkable economic success. Referring to the economic corruption in Italy and the “grabbing culture” in Russia, he further shows how deeply the presence or absence of particular features of business ethics can influence the operation of the economy, and even the nature of the society and its politics. Being an Indian himself, he warns against grand generalizations like the superiority of “Asian values” over traditional Western morals. To conclude, it is diversity—over space, over time, and between groups —that makes the study of business principles and moral sentiments a rich source of understanding and explanation.

Central to the United Nations Framework setting out the human rights responsibilities of corporations proposed by John Ruggie is the principle that corporations have a responsibility to respect human rights in their operations whether or not doing so is required by law and whether or not human rights laws are actively enforced. Ruggie proposes that corporations should respect this principle in their strategic management and day-to-day operations for reasons of corporate (enlightened) self-interest. This paper identifies this as a serious weakness and argues that identifying the responsibility to respect human rights as an explicitly ethical obligation to be respected for that reason would provide a much stronger justificatory foundation for respecting the principle seen from a corporate perspective, given that corporations are accountable to their shareholders for their deployment of the firm’s financial resources.

Practical wisdom has received scant attention in business ethics. Defined as a disposition toward cleverness in crafting morally excellent responses to, or in anticipation of, challenging particularities, practical wisdom has four psychological components: knowledge, emotion, thinking, and motivation. People's experience, reflection, and inspiration are theorized to determine their capacity for practical wisdom-related performance. Enhanced by their abilities to engage in moral imagination, systems thinking, and ethical reframing, this capacity is realized in the form of wisdom-related performance. This can be manifested either in wise business decisions or through their performance as mentors, advice givers, or dispute handlers.

To have a virtue is to possess a certain kind of trait of character that is appropriate in pursuing the moral good at which the virtue aims. Human beings are assumed to be capable of attaining those traits. Yet, a number of scholars are skeptical about the very existence of such character traits. They claim a sizable amount of empirical evidence in their support. This article is concerned with the existence and explanatory power of character as a way to assess the possibility of achieving moral virtue, with particular attention paid to business context. I aim to unsettle the so-called situationist challenge to virtue ethics. In the course of this article, I shall defend four claims, namely, that virtues are more than just behavioral dispositions, that at least some virtues may not be unitary traits, that psychologists cannot infer virtues from overt behavior, and that the situationist data do not account for the observational equivalence of traits. Since it rests on a misconception of what virtue is, the situationist objection remains unconvincing.

Despite sustained attention to ethical leadership in organizations, scholarship remains largely descriptive. This study employs an empirical approach to examine the consequences of ethical leadership on leader promotability. From a sample of ninety-six managers from two independent organizations, we found that ethical leaders were increasingly likely to be rated by their superior as exhibiting potential to reach senior leadership positions. However, leaders who displayed increased ethical leadership were no more likely to be viewed as promotable in the near-term compared to those who displayed less ethical leadership. Our findings also show ethical culture and pressure to achieve results are important contextual factors that moderate the relationships between ethical leadership and leader promotability to senior leadership roles.

The language of virtue is gaining wider appreciation in the philosophical, psychological, and management literatures. Ethicists and social scientists aim to integrate normative and empirical approaches into a new “science of virtue.” But, I submit, they are talking past each other; they hold radically different notions of what a virtue is. In this paper, I shall examine two conflicting conceptions of virtue, what I call the reductive and the non-reductive accounts of virtue. I shall critically study them and argue that the non-reductive view is the best philosophical account of virtue and the only one that can account for the way we talk about virtue in business and in everyday life. We can only understand what it means to act virtuously through the examination of the attitudes, beliefs, desires, and inclinations of the virtuous agent. I shall illustrate the differences between the reductive and non-reductive accounts by considering the virtue of gratitude.

In this article, the author lists three problems that make any serious discussion about the ethics of leadership a very difficult undertaking. He then proposes a new, postindustrial paradigm of leadership. Using that understanding of leadership, two different sets of ethical analyses of leadership are possible: (1) those concerned with the process of leadership and (2) those concerned with the content of leadership (the changes proposed by the leaders and collaborators). In the end, the author suggests that the industrial paradigm of ethics (the 18th century liberal philosophy) is inadequate to deal with the ethical decision making that leaders and collaborators must do in the 21st century. Thus, a postindustrial paradigm of ethics must be developed to enable leaders and collaborators to make the tough ethical choices that will be demanded in the new millennium.

The randomized response technique (RRT) is used to study the deceptive behavior of purchasing agents. We test the proposition that purchasing agents’ perceptions of organizational expectations influence their behavior. Results indicate that perceived pressure to perform and ethical ambiguity on the part of the firm are correlated with purchasing agents’ unethical behavior, in the form of acknowledged deception of suppliers.