Ethics in action

Recent studies of ethical design for management control systems, microfinance, manager decision making, and dealing with ethical transgressions.

This set of research tidbits looks at examples of ethics in practice. Here we present recent studies of ethical design for management control systems, microfinance, manager decision making, and dealing with ethical transgressions.

Overcoming the harmful effect of Management Control Systems on job-related stress

Ethical aspects of management control systems (MCS) are attracting increasing attention among scholars and practitioners. Much of the work centres on their aims. The authors complement this scholarship by applying the ethical principle of “no harm,” i.e., non-maleficence, to examine how those aims are achieved.

The researchers illustrate this approach by exploring the effects of four MCS designs on job-related stress drawing on the differentiation of stress into two dimensions: a challenge (i.e., unproblematic and even desirable) and a threat dimension (i.e., dangerous; causing psychological strain). Results from a field-survey with 471 managers and employees from the UK and the U.S. support key predictions and offer first insights into designing MCS based on a “no harm” ethics.

This study highlights the benefits of interdisciplinary research in business ethics and hopefully encourages more work on MCS from a perspective based on the non-maleficence principle.

Stefan Linder, et al. 2021. Designing Ethical Management Control: Overcoming the Harmful Effect of Management Control Systems on Job-Related Stress.

On ethical violations in microfinance backed small businesses

The microfinance business model focuses largely on lending to the woman in the household, rather than the man. The belief is that women are more trustworthy borrowers than men, and that lending to women may have increased social impact. Yet in several cases, women do not have control over the loan backed business despite being the borrower of record. Such takeover of the business by the man constitutes an ethical violation.

The authors find that high dependency ratios in the family are correlates of such ethical violations. Further, the authors also find that ethical violations have a significant economic cost, consistent with prior scholarship in the family-business domain. While access to microfinance increases household welfare, this beneficial impact reduces by over 50% in the presence of an ethical violation. The results suggest that microfinance lenders need to move beyond the traditional role of just being a lender to providing advice on issues like family planning, and money management, and enforcement, thus moving closer to the solidarity economy paradigm of integrating savings and credit into broader canvases of social relationships and social structures.

Rahul Nilakantan, et al. 2021. On Ethical Violations in Microfinance Backed Small Businesses: Family and Household Welfare.

Duty, utility, and virtue in managers’ ethical decision-making

The decline of empirical research on ethical decision-making based on ethical theories might imply a tacit consensus has been reached. However, the exclusion of virtue ethics, one of the three main normative ethical theories, from this stream of literature calls this potential consensus into question.

This article investigates the role of all three normative ethical theories—deontology, utilitarianism and virtue ethics—in ethical decision-making of corporate executives. It uses virtue ethics as a dependent variable thus studying the interconnectivity of all three normative ethical theories in specific circumstances. The authors find that managers use different ethical theories in different circumstances (business vs. private life, formal vs informal ethical leadership, etc.). A predictive model of ethical decision-making, however, cannot be established. The authors also find that only a limited number of variables influence the choice of ethical theory, which leans business ethics towards postmodern management paradigm. The authors suggest that moral pragmatism could provide the answer to ethical decision-making.

Matej Drašček, et al. 2021. Moral Pragmatism as a Bridge Between Duty, Utility, and Virtue in Managers’ Ethical Decision-Making.

Moral disengagement – it’s a process in need of better conceptualisation

Moral disengagement was initially conceptualised as a process through which people reconstrue unethical behaviours, with the effect of deactivating self-sanctions and thereby clearing the way for ethical transgressions. This article challenges how researchers now conceptualise moral disengagement. The current literature is overly liberal, in that it mixes two related but distinct constructs—process moral disengagement and the propensity to morally disengage—creating ambiguity in the findings. It is overly conservative, as it adopts a challengeable classification scheme of “four points in moral self-regulation” and perpetuates defining moral disengagement via a set of eight psychological mechanisms, narrowing our understanding of the phenomenon.

To address these problems, the authors propose to define process moral disengagement intentionally (specifying the necessary and sufficient conditions for correct application of the term) as intrapsychic cognitive reasoning processes through which people selectively reconstrue a moral judgment “behaviour B by actor A is morally wrong” and shift it toward becoming “behaviour B is not morally wrong” or “actor A is not responsible for behaviour B.” This definition achieves disambiguation and increased concept clarity. The authors leverage the definition to motivate a classification scheme for psychological mechanisms of moral disengagement along two dimensions—reconstruing morality and reconstruing agency—and to initiate an open inventory of psychological mechanisms that specify how process moral disengagement operates.

Read this Open Access article online for free

Ulf Schaefer & Onno Bouwmeester. 2021. Reconceptualizing Moral Disengagement as a Process: Transcending Overly Liberal and Overly Conservative Practice in the Field.

Ethical transgressions trigger more negative reactions from consumers when committed by nonprofits

The authors tested whether the impact of an organisational transgression on consumer sentiment differs depending on whether the organisation is a nonprofit. Competing hypotheses were tested: (1) that people expect higher ethical standards from a nonprofit than a commercial organisation, and so having this expectation violated generates a harsher response (the moral disillusionment hypothesis) and (2) that a nonprofit’s reputation as a moral entity buffers it against the negative consequences of transgressions (the moral insurance hypothesis).

In three experiments (collective N = 1372) participants were told that an organisation had engaged in fraud (Study 1), exploitation of women (Study 2), or unethical labor practices (Study 3). Consistent with the moral disillusionment hypothesis, decreases in consumer trust post-transgression were greater when the organisation was described as nonprofit (compared to a commercial entity), an effect that was mediated by expectancy violations.

This drop in trust then flowed through to consumer intentions (Study 1) and consumer word of mouth intentions (Studies 2 and 3). No support was found for the moral insurance hypothesis. Results confirm that nonprofits are penalised more harshly than commercial organisations when they breach consumer trust.

Matthew J. Hornsey, et al. 2021. The Moral Disillusionment Model of Organizational Transgressions: Ethical Transgressions Trigger More Negative Reactions from Consumers When Committed by Nonprofits.