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The topics of ‘ethics’ and ‘ethics in business’ are often discussed in many forums in an attempt to discover and identify the social psychology of ethical behaviour and how it transpires into daily conduct.
The 10th International Conference on Business Management organised by the Faculty of Management Studies and Commerce of University of Sri Jayewardenepura earlier this month summarised the issues faced by educators researchers, managers and policy makers under the subject of ethics, as: ‘organisations are bound by business ethics, the rules of conduct that specify what is right and wrong, just and unjust, and good and bad in their varied endeavours. They constitute the accepted set of moral values and corporate standards of conduct.’
Shedding light on the business ethics paradox, University of Bocconi, Italy Alberto Dondena Research Fellow and Murdoch University, Australia School of Engineering and IT Adjunct Professor Prof. Jane Klobas noted that all too frequently, society is faced by small and massive failures of ethical conduct. End November this year some eight banks were fined by the EU for forming illegal cartels to fix interest rates over several years, affecting the economies of both developed and developing nations.
In the Asian context, the Asian Corporate Governance Association publishes regular market watch scores for 11 Asian nations; evaluated on national business culture, corporate and government transparency, corruption and regulation. Klobas expressed that the picture is not as positive as we might expect from the strong social and cultural values of most Asian nations.
“All countries are being criticised on at least one of these indicators,” she said. “The best performing nations or regions are those that are most westernised, such as Singapore and Hong Kong (China). Even those are described as having room for improvement.”
Klobas delivered the keynote address at the inauguration of the conference.
Corporate conduct
Dealing with this paradox, Klobas ‘revisited ethics’ by reconsidering the relationship between business ethics, values and ethical behaviour from a social psychological point of view.
Breaking it down under different conducts and behaviours she went on to explain that the corporate conduct we observe is not always consistent with underlying social and cultural values, business ethics and codes of conduct.
She noted that psychologists would say organisations do not have ‘conduct’ or any ‘behaviour’, and it is the individuals within organisations act both within and on the organisation’s behalf. “What we observe as ‘corporate conduct’ is the result of decisions made and actions taken by the people who work in the organisations,” Klobas said. “Organisational and individual CSR are intertwined; neither exists without the other.”
Social and cultural values
“In framing the business ethics paradox with reference to ‘oriental value’ we presuppose that the social and cultural values that have a dominant influence on ethical conduct will be drawn to a large extent from national, ethnic and religious cultural value.” However, one must also note the other sources of social and cultural values that could have a stronger effect on ethical behaviour than national values.
Noting other sources of cultural values, Klobas listed geography, family, religion, ethnicity, field of study and organisation and organisational subunits.
Business ethics and standards of conduct
To help put business ethics into a logical space between values and behaviours, she used the Iceberg Model of Culture to illustrate that culture is extremely deep-rooted and little of it is directly observable. The small part of culture that is visible (usually said to be about 10%) consists of behaviours and symbols, artefacts and arts. Behaviour therefore is at the tip of the iceberg while values are the deepest element of culture.
She noted that business ethics can be viewed as a specific type of moral values. The Iceberg Model suggests that values, even if compatible are far from behaviours.
“Norms are expectations of how people and groups behave. Business ethics have a normative component. This is much closer to surface and the behaviour itself, than values,” Klobas said. She expressed that social psychologists note that norm, being more specific to behaviour, is likely to be a better predictor of behaviour than value.
According to the same Model, standards of conduct are also ‘not’ ethical behaviours although they are nearer to them and are observable. Standards of conduct are, “expressions of business ethics, artefacts which represent organisational principles and policies or aspirations (or institutionalised agreements) about what they should be.”
Link between values, business ethics and ethical behaviour
Klobas asserted that it is common for people’s behaviour to be inconsistent with their words or intentions. The principle of ‘Literal Inconsistency’ in short notes that good intentions are less likely to be acted on than the bad ones – people with good intentions can appear to behave inconsistently.
This makes it easy to predict unethical behaviour (at least when someone declares their unethical intentions) than predict ethical behaviour.
How do we explain corporate conduct observed is not always consistent with underling values, business ethics and codes? On one hand the answer could simply be ‘Because corporate conduct is the result of human behaviour; and humans are humans and no matter how good the intention is, we do not always follow through.’
“This however is not a good enough answer,” she commented.
Introducing the principle of ‘Asymmetry’ Klobas explained that these are factors that elucidate engaging in behaviour (such as behaving ethically) are not the same as the factors that explain ‘not’ engaging in the behaviour (in this case, behaving unethically).
“In ethics, the problem might be posed as ethical judgment or decisions. Of we reduce it to its simplest form; it would be a choice between two options – the clean, open (ethical) path and the
dirty, non-transparent (unethical) path.”
Further, in social psychology one would consider whether we could predict behaviour better by examining the ethical and unethical decision path separately, effectively as paths to two different sets of behaviour – what would lead to ethical behaviour and unethical behaviour in this situation.
“Expecting different factors might be involved in answering each question, the information gathered would help promote ethical conduct while preventing unethical conduct.”
Insights from reasoned action approach
Klobas noted that similar questions have been studied in various fields of human behaviour over the past 50 years or so, using the reasoned action approach of Martin Fishbein and Icek Ajzen. This approach she said, has been used successfully to explain health behaviours, consumer behaviour, and in fields as diverse as IT and demography. “It has also been used with some success in business ethics to explain corporate philanthropy, corporate fraud and bribery although it is not widely used in the field.
She added: “In the last two issues of Journal of Business ethics for 2013, Mudrack and Mason have published strong criticism of the ethics literature.”
Effectively, they point out that results of studies about ethical judgment and ethical behaviour are inconsistent because definitions are inconsistent and the behaviour that is studied differs so greatly that they cannot readily be compared.
“For empirical study, the more clearly we define the behaviour we want to explain or predict, the better we are able to explain/predict it, regardless of all the other options I have raised,” Klobas said. “Behaviours are specific to context and target.” When applying the theory of planned behaviour, ‘ethical behaviours’ must be replaced with the specific behaviour that needs to be explained or predicted.
Lessons from social psychology of ethical behaviour
Klobas reflected that firstly, things are perhaps not as bad as they might seem – “much of the behaviour we observe is human, and as human behaviour, it follows pattern, many of which are quite well understood.”
The devil however is in the detail. Whether one is a researcher, educator, policy maker or manager, it is important to adhere to ethical values, to demonstrate them and to have written (and therefore observable) codes of conduct.
This however is not enough to enable and encourage good intentions to consistently be transformed in to ethical behaviours on the part of individuals and ethical corporate conduct. “The final step requires careful analysis of the behaviours that constitute ethical conduct in any given context, and equally careful analysis of the beliefs that give rise to ethical intentions, and critically to incentives or other mechanisms that enable good intentions to be transformed into behaviours without obstacles.”
Klobas acknowledged that this is a challenge for all, but one that we can embrace in the knowledge that the outcomes will be positive and long lasting. “Many, many opportunities for research are opened up by this approach to ethics. If you are looking for a new research project, I recommend it!” she expressed.
Faculty of Management Studies and Commerce Dean Prof. Sampath Amaratunge and University of Sri Jayewardenepura Vice Chancellor Dr. N.L.A. Karunaratne also spoke at the conference inauguration. The inauguration was followed by technical sessions and a cultural show thereafter.
Pix by Upul Abayasekara
