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research articles in business ethics

  • 02 Jan 2024
  • Cold Call Podcast

Should Businesses Take a Stand on Societal Issues?

Should businesses take a stand for or against particular societal issues? And how should leaders determine when and how to engage on these sensitive matters? Harvard Business School Senior Lecturer Hubert Joly, who led the electronics retailer Best Buy for almost a decade, discusses examples of corporate leaders who had to determine whether and how to engage with humanitarian crises, geopolitical conflict, racial justice, climate change, and more in the case, “Deciding When to Engage on Societal Issues.”

research articles in business ethics

  • 12 Dec 2023

Can Sustainability Drive Innovation at Ferrari?

When Ferrari, the Italian luxury sports car manufacturer, committed to achieving carbon neutrality and to electrifying a large part of its car fleet, investors and employees applauded the new strategy. But among the company’s suppliers, the reaction was mixed. Many were nervous about how this shift would affect their bottom lines. Professor Raffaella Sadun and Ferrari CEO Benedetto Vigna discuss how Ferrari collaborated with suppliers to work toward achieving the company’s goal. They also explore how sustainability can be a catalyst for innovation in the case, “Ferrari: Shifting to Carbon Neutrality.” This episode was recorded live December 4, 2023 in front of a remote studio audience in the Live Online Classroom at Harvard Business School.

research articles in business ethics

  • 11 Dec 2023
  • Research & Ideas

Doing Well by Doing Good? One Industry’s Struggle to Balance Values and Profits

Few companies wrestle with their moral mission and financial goals like those in journalism. Research by Lakshmi Ramarajan explores how a disrupted industry upholds its values even as the bottom line is at stake.

research articles in business ethics

  • 27 Nov 2023

Voting Democrat or Republican? The Critical Childhood Influence That's Tough to Shake

Candidates might fixate on red, blue, or swing states, but the neighborhoods where voters spend their teen years play a key role in shaping their political outlook, says research by Vincent Pons. What do the findings mean for the upcoming US elections?

research articles in business ethics

  • 21 Nov 2023

The Beauty Industry: Products for a Healthy Glow or a Compact for Harm?

Many cosmetics and skincare companies present an image of social consciousness and transformative potential, while profiting from insecurity and excluding broad swaths of people. Geoffrey Jones examines the unsightly reality of the beauty industry.

research articles in business ethics

  • 09 Nov 2023

What Will It Take to Confront the Invisible Mental Health Crisis in Business?

The pressure to do more, to be more, is fueling its own silent epidemic. Lauren Cohen discusses the common misperceptions that get in the way of supporting employees' well-being, drawing on case studies about people who have been deeply affected by mental illness.

research articles in business ethics

  • 07 Nov 2023

How Should Meta Be Governed for the Good of Society?

Julie Owono is executive director of Internet Sans Frontières and a member of the Oversight Board, an outside entity with the authority to make binding decisions on tricky moderation questions for Meta’s companies, including Facebook and Instagram. Harvard Business School visiting professor Jesse Shapiro and Owono break down how the Board governs Meta’s social and political power to ensure that it’s used responsibly, and discuss the Board’s impact, as an alternative to government regulation, in the case, “Independent Governance of Meta’s Social Spaces: The Oversight Board.”

research articles in business ethics

  • 24 Oct 2023

From P.T. Barnum to Mary Kay: Lessons From 5 Leaders Who Changed the World

What do Steve Jobs and Sarah Breedlove have in common? Through a series of case studies, Robert Simons explores the unique qualities of visionary leaders and what today's managers can learn from their journeys.

research articles in business ethics

  • 03 Oct 2023
  • Research Event

Build the Life You Want: Arthur Brooks and Oprah Winfrey Share Happiness Tips

"Happiness is not a destination. It's a direction." In this video, Arthur C. Brooks and Oprah Winfrey reflect on mistakes, emotions, and contentment, sharing lessons from their new book.

research articles in business ethics

  • 12 Sep 2023

Successful, But Still Feel Empty? A Happiness Scholar and Oprah Have Advice for You

So many executives spend decades reaching the pinnacles of their careers only to find themselves unfulfilled at the top. In the book Build the Life You Want, Arthur Brooks and Oprah Winfrey offer high achievers a guide to becoming better leaders—of their lives.

research articles in business ethics

  • 10 Jul 2023
  • In Practice

The Harvard Business School Faculty Summer Reader 2023

Need a book recommendation for your summer vacation? HBS faculty members share their reading lists, which include titles that explore spirituality, design, suspense, and more.

research articles in business ethics

  • 01 Jun 2023

A Nike Executive Hid His Criminal Past to Turn His Life Around. What If He Didn't Have To?

Larry Miller committed murder as a teenager, but earned a college degree while serving time and set out to start a new life. Still, he had to conceal his record to get a job that would ultimately take him to the heights of sports marketing. A case study by Francesca Gino, Hise Gibson, and Frances Frei shows the barriers that formerly incarcerated Black men are up against and the potential talent they could bring to business.

research articles in business ethics

  • 04 Apr 2023

Two Centuries of Business Leaders Who Took a Stand on Social Issues

Executives going back to George Cadbury and J. N. Tata have been trying to improve life for their workers and communities, according to the book Deeply Responsible Business: A Global History of Values-Driven Leadership by Geoffrey Jones. He highlights three practices that deeply responsible companies share.

research articles in business ethics

  • 14 Mar 2023

Can AI and Machine Learning Help Park Rangers Prevent Poaching?

Globally there are too few park rangers to prevent the illegal trade of wildlife across borders, or poaching. In response, Spatial Monitoring and Reporting Tool (SMART) was created by a coalition of conservation organizations to take historical data and create geospatial mapping tools that enable more efficient deployment of rangers. SMART had demonstrated significant improvements in patrol coverage, with some observed reductions in poaching. Then a new predictive analytic tool, the Protection Assistant for Wildlife Security (PAWS), was created to use artificial intelligence (AI) and machine learning (ML) to try to predict where poachers would be likely to strike. Jonathan Palmer, Executive Director of Conservation Technology for the Wildlife Conservation Society, already had a good data analytics tool to help park rangers manage their patrols. Would adding an AI- and ML-based tool improve outcomes or introduce new problems? Harvard Business School senior lecturer Brian Trelstad discusses the importance of focusing on the use case when determining the value of adding a complex technology solution in his case, “SMART: AI and Machine Learning for Wildlife Conservation.”

research articles in business ethics

  • 14 Feb 2023

Does It Pay to Be a Whistleblower?

In 2013, soon after the US Securities and Exchange Commission (SEC) had started a massive whistleblowing program with the potential for large monetary rewards, two employees of a US bank’s asset management business debated whether to blow the whistle on their employer after completing an internal review that revealed undisclosed conflicts of interest. The bank’s asset management business disproportionately invested clients’ money in its own mutual funds over funds managed by other banks, letting it collect additional fees—and the bank had not disclosed this conflict of interest to clients. Both employees agreed that failing to disclose the conflict was a problem, but beyond that, they saw the situation very differently. One employee, Neel, perceived the internal review as a good-faith effort by senior management to identify and address the problem. The other, Akash, thought that the entire business model was problematic, even with a disclosure, and believed that the bank may have even broken the law. Should they escalate the issue internally or report their findings to the US Securities and Exchange Commission? Harvard Business School associate professor Jonas Heese discusses the potential risks and rewards of whistleblowing in his case, “Conflicts of Interest at Uptown Bank.”

research articles in business ethics

  • 17 Jan 2023

Good Companies Commit Crimes, But Great Leaders Can Prevent Them

It's time for leaders to go beyond "check the box" compliance programs. Through corporate cases involving Walmart, Wells Fargo, and others, Eugene Soltes explores the thorny legal issues executives today must navigate in his book Corporate Criminal Investigations and Prosecutions.

research articles in business ethics

  • 29 Nov 2022

How Will Gamers and Investors Respond to Microsoft’s Acquisition of Activision Blizzard?

In January 2022, Microsoft announced its acquisition of the video game company Activision Blizzard for $68.7 billion. The deal would make Microsoft the world’s third largest video game company, but it also exposes the company to several risks. First, the all-cash deal would require Microsoft to use a large portion of its cash reserves. Second, the acquisition was announced as Activision Blizzard faced gender pay disparity and sexual harassment allegations. That opened Microsoft up to potential reputational damage, employee turnover, and lost sales. Do the potential benefits of the acquisition outweigh the risks for Microsoft and its shareholders? Harvard Business School associate professor Joseph Pacelli discusses the ongoing controversies around the merger and how gamers and investors have responded in the case, “Call of Fiduciary Duty: Microsoft Acquires Activision Blizzard.”

research articles in business ethics

  • 15 Nov 2022

Stop Ignoring Bad Behavior: 6 Tips for Better Ethics at Work

People routinely overlook wrongdoing, even in situations that cause significant harm. In his book Complicit: How We Enable the Unethical and How to Stop, Max Bazerman shares strategies that help people do the right thing even when those around them aren't.

research articles in business ethics

  • 08 Nov 2022

How Centuries of Restrictions on Women Shed Light on Today's Abortion Debate

Going back to pre-industrial times, efforts to limit women's sexuality have had a simple motive: to keep them faithful to their spouses. Research by Anke Becker looks at the deep roots of these restrictions and their economic implications.

research articles in business ethics

  • 20 Sep 2022

How Partisan Politics Play Out in American Boardrooms

The discord gripping the nation has reached the heights of corporate America, with costly consequences for companies and investors. Research by Elisabeth Kempf shows just how polarized the executive suite has become.

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Business Ethics

Exchange is fundamental to business. ‘Business’ can mean an activity of exchange. One entity (e.g., a person, a firm) “does business” with another when it exchanges a good or service for valuable consideration, i.e., a benefit such as money. ‘Business’ can also mean an entity that offers goods and services for exchange, i.e., that sells things. Target is a business. Business ethics can thus be understood as the study of the ethical dimensions of the exchange of goods and services, and of the entities that offer goods and services for exchange. This includes related activities such as the production, distribution, marketing, sale, and consumption of goods and services (cf. Donaldson & Walsh 2015; Marcoux 2006b).

Questions in business ethics are important and relevant to everyone. Almost all of us “do business”, or engage in a commercial transaction, almost every day. Many of us spend a major portion of our lives engaged in, or preparing to engage in, exchange activities, on our own or as part of organizations. Business activity shapes the world we live in, sometimes for good and sometimes for ill.

Business ethics in its current incarnation is a relatively new field, growing out of research by moral philosophers in the 1970’s and 1980’s. But scholars have been thinking about the ethical dimensions of commerce at least since the Code of Hammurabi (c. 1750 BC).

This entry summarizes research on central questions in business ethics, including: What sorts of things can be sold? How can they be sold? In whose interests should firms be managed? Who should manage them? What do firms owe their workers, and what do workers owe their firms? Should firms try to solve social problems? Is it permissible for them to try to influence political outcomes? Given the vastness of the field, of necessity certain questions are not addressed.

1. Varieties of business ethics

2. corporate moral agency, 3.1 ends: shareholder primacy or stakeholder balance, 3.2 means: control by shareholders or others too, 4. important frameworks for business ethics, 5.1 the limits of markets, 5.2 product safety and liability, 5.3 advertising, 5.5 pricing, 6.1 hiring and firing, 6.2 compensation, 6.3 meaningful work, 6.4 whistleblowing, 7.1 corporate social responsibility, 7.2 corporate political activity, 7.3 international business, 8. the status of business ethics, other internet resources, related entries.

Many people engaged in business activity, including accountants and lawyers, are professionals. As such, they are bound by codes of conduct promulgated by professional societies. Many firms also have detailed codes of conduct, developed and enforced by teams of ethics and compliance personnel. Business ethics can thus be understood as the study of professional practices, i.e., as the study of the content, development, enforcement, and effectiveness of the codes of conduct designed to guide the actions of people engaged in business activity. This entry will not consider this form of business ethics. Instead, it considers business ethics as an academic discipline.

The academic field of business ethics is shared by social scientists and normative theorists. But they address different questions. Social scientists try to answer descriptive questions like: Does corporate social performance improve corporate financial performance, i.e., does ethics pay (Vogel 2005; Zhao & Murrell 2021)? Why do people engage in unethical behavior (Bazerman & Tenbrunsel 2011; Werhane et al. 2013). How can we make them stop (Warren, Gaspar, & Laufer 2014)? I will not consider such questions here. This entry focuses on questions in normative business ethics, most of which are variants on the question: What is ethical and unethical in business?

Normative business ethicists (hereafter the qualifier ‘normative’ will be assumed) tend to accept the basic elements of capitalism. That is, they assume that the means of production can be privately owned and that markets—featuring voluntary exchanges between buyers and sellers at mutually agreeable prices—should play an important role in the allocation of resources. Those who reject capitalism will see some debates in business ethics (e.g., about firm ownership and control) as misguided.

Some entities “do business” with the goal of making a profit, and some do not. Pfizer and Target are examples of the former; Rutgers University and the Metropolitan Museum of Art are examples of the latter. An organization identified as a ‘business’ is typically understood to be one that seeks profit, and for-profit organizations are the ones that business ethicists focus on. But many of the ethical issues described below arise also for non-profit organizations and individual economic agents.

One way to think about business ethics is in terms of the moral obligations of agents engaged in business activity. Who can be a moral agent? Individual persons, obviously. What about firms? This is treated as the issue of “corporate moral agency” or “corporate moral responsibility”. Here ‘corporate’ does not refer to the corporation as a legal entity, but to a collective or group of individuals. To be precise, the question is whether firms are moral agents and morally responsible considered as ( qua ) firms, not considered as aggregates of individual members of firms.

We often think and speak as if corporations are morally responsible. We say things like “Costco treats its employees well” or “BP harmed the environment in the Gulf of Mexico”, and in doing so we appear to assign agency and responsibility to firms themselves (Dempsey 2003). We may wish to praise Costco and blame BP for their behavior. But this may be just a metaphorical way of speaking, or a shorthand way of referring to certain individuals who work in these firms (Velasquez 1983, 2003). Corporations are different in many ways from paradigm moral agents, viz., people. They don’t have minds, for one thing, or bodies, for another. The question is whether corporations are similar enough to people to warrant ascriptions of moral agency and responsibility.

In the business ethics literature, French is a seminal thinker on this topic. In early work (1979, 1984), he argued that firms are morally responsible for what they do, and indeed should be seen as “full-fledged” moral persons. He bases this conclusion on his claim that firms have internal decision-making structures, through which they cause events to happen, and act intentionally. Some early responses to French’s work accepted the claim that firms are moral agents, but denied that they are moral persons. Donaldson (1982) claims that firms cannot be persons because they lack important human capacities, such as the ability to pursue their own happiness (see also Werhane 1985). Other responses went further and denied that firms are moral agents. Velasquez (1983, 2003) argues that, while corporations can act, they cannot be held responsible for their actions, because those actions are brought about by the actions of their members. In later work, French (1995) recanted his claim that firms are moral persons, though not his claim that they are moral agents.

Debate about corporate moral agency and moral responsibility rages on in important new work (Orts & Smith 2017; Sepinwall 2016). One issue that has received sustained attention is choice. Appealing to discursive dilemmas, List & Pettit (2011) argue that the decisions of corporations can be independent of the decisions of their members (see also Copp 2006). This makes the corporation an autonomous agent, and since it can choose in the light of values, a morally responsible one. Another issue is intention. A minimal condition of moral agency is the ability to form intentions. Some deny that corporations can form them (S. Miller 2006; Rönnegard 2015). If we regard an intention as a mental state, akin to a belief or desire, or a belief/desire complex, they may be right. But not if we regard an intention in functionalist terms (Copp 2006; Hess 2014), as a plan (Bratman 1993), or in terms of reasons-responsiveness (Silver forthcoming). A third issue is emotion. Sepinwall (2017) argues that being capable of emotion is a necessary condition of moral responsibility, and since corporations aren’t capable of emotion, they aren’t morally responsible. Again, much depends on what it means to be capable of emotion. If this capability can be given a functionalist reading, as Björnsson & Hess (2017) claim, perhaps corporations are capable of emotion (see also Gilbert 2000). Pursuit of these issues lands one in the robust and sophisticated literature on collective responsibility and intentionality, where firms feature as a type of collective. (See the entries on collective responsibility , collective intentionality , and shared agency .)

Another question asked about corporate moral agency is: Does it matter? Perhaps BP itself was morally responsible for polluting the Gulf of Mexico. Perhaps certain individuals at BP were. What hangs on this? Some say: a lot. In some cases there may be no individual who is morally responsible for the firm’s behavior (List & Pettit 2011; Phillips 1995), and we need someone to blame, and perhaps punish. Blame may be the fitting response, and blame (and punishment) incentivizes the firm to change its behavior. Hasnas (2012) says very little hangs on this question. Even if firms are not morally responsible for the harms they cause, we can still require them to pay restitution, condemn their culture, and subject them to regulation. Moreover, Hasnas says, we should not blame and punish firms, for our blame and punishment inevitably lands on the innocent.

3. The ends and means of corporate governance

There is significant debate about the ends and means of corporate governance, i.e., about who firms should be managed for, and who should (ultimately) manage them. Much of this debate is carried on with the large publicly-traded corporation in view.

There are two main views about the proper ends of corporate governance. According to one view, firms should be managed in the best interests of shareholders. It is typically assumed that managing firms in shareholders’ best interests requires maximizing their wealth (cf. Hart & Zingales 2017; Robson 2019). This view is called “shareholder primacy” (Stout 2012) or—in order to contrast it more directly with its main rival (to be discussed below) “shareholder theory”. Shareholder primacy is the dominant view about the ends of corporate governance in business schools and in the business world.

A few writers argue for shareholder primacy on deontological grounds, i.e., by appealing to rights and duties. On this argument, shareholders own the firm, and hire managers to run it for them on the condition that the firm is managed in their interests. Shareholder primacy is thus based on a promise that managers make to shareholders (Friedman 1970; Hasnas 1998). In response, some argue that shareholders do not own the firm. They own stock, a type of corporate security (Bainbridge 2008; Stout 2012); the firm itself may be unowned (Strudler 2017). Others argue that managers do not make, explicitly or implicitly, any promises to shareholders to manage the firm in a certain way (Boatright 1994). More writers argue for shareholder primacy on consequentialist grounds. On this argument, managing firms in the interests of shareholders is more efficient than managing them in any other way (Hansmann & Kraakman 2001; Jensen 2002). In support of this, some argue that, if managers are not given a single objective that is clear and measurable—viz., maximizing shareholder value—then they will have greater opportunity for self-dealing (Stout 2012). The consequentialist argument for shareholder primacy run into problems that afflict many versions of consequentialism: in requiring all firms to aim at a certain objective, it does not allow sufficient scope for personal choice (Hussain 2012). Most think that people should be able to pursue projects, including economic projects, that matter to them, even if those projects do not maximize shareholder value.

The second main view about the proper ends of corporate governance is given by stakeholder theory. This theory was first put forward by Freeman in the 1980s (Freeman 1984; Freeman & Reed 1983), and has been refined by Freeman and collaborators over the years (see, e.g., Freeman 1994; Freeman et al. 2010; Freeman, Harrison, & Zyglidopoulos 2018; Jones, Wicks, & Freeman 2002; Phillips, Freeman, & Wicks 2003). According to stakeholder theory—or at least, early formulations of it—instead of managing the firm in the best interests of shareholders only, managers should seek to “balance” the interests of all stakeholders, where a stakeholder is anyone who has a “stake”, or interest (including a financial interest), in the firm. Blair and Stout’s (1999) “team production” theory of corporate governance offers similar guidance.

To be clear, in a firm in which shareholders’ interests are prioritized, other stakeholders will benefit too. Employees will receive wages, customers will receive goods and services, and so on. The debate between shareholder and stakeholder theorists is about what to do with the residual revenues, i.e., what’s left over after firms meet their contractual obligations to employees, customers, and others. Shareholder theorists think they should be used to maximize shareholder wealth. Stakeholder theorists think they should be used to benefit all stakeholders.

To its critics, stakeholder theory has seemed both incompletely articulated and weakly defended. With respect to articulation, one question that has been pressed is: Who are the stakeholders (Orts & Strudler 2002, 2009)? The groups most commonly identified are shareholders, employees, the community, suppliers, and customers. But other groups have stakes in the firm, including creditors, the government, and competitors. It makes a great deal of difference where the line is drawn, but stakeholder theorists have not provided a clear rationale for drawing it in one place rather than another. Another question is: What does it mean to “balance” the interests of all stakeholders, other than not always giving precedence to shareholders’ interests (Orts & Strudler 2009)? With respect to defense, critics have wondered what the rationale is for managing firms in the interests of all stakeholders. In one place, Freeman (1984) offers an instrumental argument, claiming that balancing stakeholders’ interests is better for the firm strategically than maximizing shareholder wealth (see also Blair & Stout 1999; Freeman, Harrison, & Zyglidopoulos 2018). (Defenders of shareholder primacy say the same thing about their view.) In another, he gives an argument that appeals to Rawls’s justice as fairness (Evan & Freeman 1988; cf. Child & Marcoux 1999).

In recent years, questions have been raised about whether stakeholder theory is appropriately seen as a genuine competitor to shareholder primacy, or is even appropriately called a “theory”. In one article, Freeman and collaborators say that stakeholder theory is simply “the body of research … in which the idea of ‘stakeholders’ plays a crucial role” (Jones et al. 2002). In another, Freeman describes stakeholder theory as “a genre of stories about how we could live” (1994: 413). It may be, as Norman (2013) says, that stakeholder is now best regarded as “mindset”, i.e., a way of looking at the firm that emphasizes its embeddedness in a network of relationships. In this case, there may be no dispute between shareholder and stakeholder theorists.

Resolving the debate between shareholder and stakeholder theorists (assuming they are competitors) will not resolve all or even most of the ethical questions in business. This is because it is a debate about the ends of corporate governance. It cannot answer questions about the moral constraints that must be observed in pursuit of those ends (Goodpaster 1991; Norman 2013), including duties of beneficence (Mejia 2020). Neither shareholder theory nor stakeholder theory is plausibly interpreted as the view that corporate managers should do whatever is possible to maximize shareholder wealth and balance all stakeholders’ interests, respectively. Rather, these views should be interpreted as views that managers should do whatever is consistent with the requirements of morality to achieve these ends. A large part of business ethics is trying to determine what these requirements are.

Answers to questions about the means of corporate governance often mirror answers to question about the ends of corporate governance. Often the best way to ensure that a firm is managed in the interests of a certain party P is to give P control. Conversely, justifications for why the firm should be managed in the interests of P sometimes appeal P’s rights to control it.

Friedman (1970), for example, thinks that shareholders’ ownership of the firm gives them a right to control the firm (which they can use to ensure that the firm is run in their interests). We might see control rights for shareholders as following analytically from the concept of ownership. To own a thing is to have a bundle of rights with respect to that thing. One of the standard “incidents” of ownership is control. (See the entry on property and ownership .)

As noted, in recent years the idea that the firm is something that can be owned has been challenged (Bainbridge 2008; Stout 2012; Strudler 2017). If this is right, then the ownership argument collapses. But similar contractarian arguments for shareholder control of firms have been constructed which do not rely on the assumption of firm ownership. All that is assumed in these arguments is that some people own capital, and others own labor. Capital can “hire” labor (and other inputs of production) or labor can “hire” capital. It just so happens that, in most cases, capital hires labor. We know this because in most cases capital-providers are the ultimate decision-makers in the firm. In a publicly-traded corporation, they elect the board. These points are emphasized especially by those who regard the firm as a “nexus of contracts” among various parties (Easterbrook & Fischel 1996; Jensen & Meckling 1976).

Many writers find this result troubling. Even if the governance structure in most firms is in some sense agreed to, they say that it is unjust in other ways. Anderson (2017) characterizes standard corporate governance regimes as oppressive and unaccountable private dictatorships. To address this injustice, these writers call for various forms of worker participation in managerial decision-making, including the ability by workers to reject arbitrary directives by managers (Hsieh 2005), worker co-determination of firms’ policies and practices (Ferreras 2017; McMahon 1994), and exclusive control of productive enterprises by workers (Dahl 1985).

Arguments for these governance structures take various forms. One appeals to the value of protecting workers’ interests (González-Ricoy 2014; Hsieh 2005). Another appeals to the value of autonomy, or a right to freely determine one’s actions, including one’s actions at work (Malleson 2014; McCall 2001). A third argument for worker control is the “parallel case” argument. According to it, if states should be governed democratically, then so should firms, because firms are like states in the relevant respects (Dahl 1985; Landemore & Ferreras 2016; cf. Mayer 2000). A fourth argument sees worker participation in firm decision-making as valuable training for citizens in a democratic society (Pateman 1970).

Space considerations prevent detailed examinations of these arguments (for critical reviews see Frega, Herzog, & Neuhäuser 2019; Hsieh 2008). But criticisms generally fall into two categories. The first insists on the normative priority of agreements, of the sort described above. There are few legal restrictions on the types of governance structures that firms can have. And some firms are in fact controlled by workers (Dow 2003; Hansmann 1996). To insist that other firms should be governed this way is to say, according to this argument, that people should not be allowed to arrange their economic lives as they see fit. Another criticism of worker participation appeals to efficiency. Allowing workers to participate in managerial decision-making may decrease the pace of decision-making, since it requires giving many workers a chance to make their voices heard (Hansmann 1996). It may also raise the cost of capital for firms, as investors may demand more favorable terms if they are not given control of the enterprise in return (McMahon 1994). Both sources of inefficiency may put the firm at a significant disadvantage in a competitive market. It may not just be a matter of competitive disadvantage. If it were, the problem could be solved by making all firms worker-controlled. The problem may be one of diminished productivity more generally.

Business ethicists seek to understand the ethical contours of business activity. One way of advancing this project is by choosing a normative framework and teasing out its implications for business issues. In principle, it is possible to do this for any normative framework. Below are four that have received significant attention.

One influential approach to business ethics draws on virtue ethics. Moore (2017) develops and applies MacIntyre’s (1984) virtue ethics to business. For MacIntyre, there are goods internal to practices, and certain virtues are necessary to achieve those goods. Building on MacIntyre, Moore develops the idea that business is a practice (or contains practices), and thus has certain goods internal to it (or them), the attainment of which requires the cultivation of business virtues. Aristotelian approaches to virtue in business are found in Alzola (2012) and de Bruin (2015). Scholars have also been inspired by the Aristotelian idea that the good life is achieved in a community (Sison & Fontrodona 2012), and have considered how business communities must be structured to help their members flourish (Hartman 2015; Solomon 1993).

Another important approach to the study of business ethics comes from deontology, especially Kant’s version (Arnold & Bowie 2003; Bowie 2017; Scharding 2015; Hughes 2020). Kant’s claim that humanity should be treated always as an end, and never as a means only, has proved especially fruitful for analyzing the human interactions at the core of commercial transactions. In competitive markets, people may be tempted to deceive, cheat, use, exploit, or manipulate others to gain an edge. Kantian moral theory singles out these actions out as violations of human dignity (Hughes 2019; Smith & Dubbink 2011).

Ethical theory, including virtue theory and deontology, is useful for thinking about how individuals should relate to each other. But business ethics also comprehends the laws and regulations that structure markets and firms. Here political theory seems more relevant. A number of business ethicists have sought to identify the implications of Rawls’s (1971) justice as fairness for business. This is not an easy task, since while Rawls makes some suggestive remarks about markets and firms, he does not articulate specific conclusions or develop detailed arguments for them. But scholars have argued that justice as fairness: (1) is incompatible with significant inequalities of power and authority within firms (S. Arnold 2012); (2) requires people to have an opportunity to perform meaningful work (Moriarty 2009; cf. Hasan 2015); and requires alternative forms of (3) corporate governance (Berkey 2021; Blanc & Al-Amoudi 2013; Norman 2015; cf. Singer 2015) and (4) corporate ownership (M. O’Neill & Williamson 2012).

A fourth approach to business ethics is called the “market failures approach” (MFA). It originates with McMahon (1981), but it has been developed in most detail by Heath (2014) (for discussion see Moriarty 2020 and Singer 2018). According to Heath, the justification of the market is that it produces efficient—in the sense of Pareto-optimal— outcomes. But this only happens when the conditions of perfect competition obtain, such as perfect information, no market power, and no barriers to entry or exit. (When they don’t, markets fail—hence the market failures approach.) On the MFA, these conditions are the source of ethical rules for market actors. The MFA says that market actors, including sellers and buyers, should not create or take advantage of market imperfections. So, for example, firms should not deceive consumers (creating information asymmetries) or lobby governments to levy tariffs on foreign competitors (erecting barriers to entry).

Selecting a normative framework and applying it to a range of issues is an important way of doing business ethics. But it is not the only way. Indeed, the more common approach is to identify a business activity and then analyze it using “mid-level” principles or ideals common to many moral and political theories. Below I consider ethical issues that arise at the nexus of firms’ engagement with three important groups: consumers, employees, and society.

5. Firms and consumers

The main way that firms interact with consumers is by selling, or attempting to sell, products and services to them. Many ethical issues attend this interaction.

Many have argued that some things should not be for sale (Anderson 1993; MacDonald & Gavura 2016; Sandel 2012; Satz 2010). Among the things commonly said to be inappropriate for sale are sexual services, surrogacy services, and human organs. Some writers object to markets in these items for consequentialist reasons. They argue that markets in commodities like sex and kidneys will lead to the exploitation of vulnerable people (Satz 2010). Others object to the attitudes or values expressed in such markets. They claim that markets in surrogacy services express the attitude that women are mere vessels for the incubation of children (Anderson 1993); markets in kidneys suggest that human life can be bought and sold (Sandel 2012); and so on. (For a discussion of what it might mean for a market to “express” a value, see Jonker [2019].)

Other writers criticize these arguments, and in general, the attempt to “wall-off” certain goods and services from markets. Brennan and Jaworksi (2016) object to expressive or “semiotic” arguments against markets in contested commodities (cf. Brown & Maguire 2019). Whether selling a particular thing for money expresses disrespect, they note, is culturally contingent. They and others (e.g., Taylor 2005) also argue that the bad effects of markets in contested commodities can be eliminated or at least ameliorated through appropriate regulation, and that anyway, the good effects of such markets (e.g., a decrease in the number of people who die because they are waiting for a kidney) outweigh the bad.

Some things that firms may wish to sell, and that people may wish to buy, pose a significant risk of harm, to the user and others. When is a product too unsafe to be sold? This question is often answered by government agencies. In the U.S., a number of government agencies, including the Consumer Product Safety Commission (CPSC), the National Highway Traffic Safety Administration (NHTSA), and the Food and Drug Administration (FDA), are responsible for assessing the safety of products for the consumer market. In some cases these standards are mandatory (e.g., medicines and medical devices); in other cases they are voluntary (e.g., trampolines and tents). The state identifies minimum standards and individual businesses can choose to adopt more stringent ones.

Questions about product safety are a matter of significant debate among economists, legal scholars, and public policy experts. Business ethicists have paid scant attention to these questions (but see Brenkert 1981). Existing treatments often combine discussions of safety with discussions of liability—the question of who should pay for harms that products cause—and tend to be found in business ethics textbooks. One of the most careful treatments is Velasquez’s (2012). He distinguishes three (compatible) views: (1) the “contract view”, according to which the manufacturer’s duty is only to accurately disclose all risks associated with the product; (2) the “due care view”, according to which the manufacturer should exercise due care to prevent buyers from being injured by the product; and (3) the “social costs view”, according to which the manufacturer should pay for any injuries the product causes, even if the manufacturer has accurately disclosed all risks associated with the product and has exercised due care to prevent injury (see also Boatright & Smith 2017). In the U.S. and elsewhere, the law has moved in the direction of the social costs view, where it is known as “strict liability”.

There is much room for philosophical exploration of these issues. One area that merits attention is the definitions of key terms, such as “safety” and “risk”. Drop side cribs pose risks to consumers; so do trampolines. On what basis should the former be prohibited but the latter not be (Hasnas 2010)? The answer must take into account the value of these products, how obvious the risks they pose are, and the availability of substitutes. With respect to liability, we may wonder whether it is fair to hold manufacturers responsible for harms their products cause, when the manufacturers are not morally at fault for those harms. On the other hand, it may be unfair to force consumers to bear the full costs of their injuries, when they too are not morally at fault. The question may be one for society as a whole: what is the most efficient or just way to distribute these costs?

Most advertising contains both an informational component and a persuasive component. Advertisements tell us something about a product, and try to persuade us to buy it. Both of these components can be subject to ethical evaluation.

Emphasizing its informational component, some writers stress the positive value of advertising. Markets function efficiently only when certain conditions are met. One of these conditions is perfect information. Minimally, consumers have to understand the features of the products for sale. While this condition will never be fully met, advertising can help to ensure that it is met to a greater degree (Heath 2014). Another value that can be promoted through advertising is autonomy. People have certain needs and desires—e.g., to eat healthy food, to drive a safe car—which their choices as consumers help them to satisfy. Their choices are more likely to satisfy their needs and desires if they have information about what is for sale, which advertising can provide (Goldman 1984).

These good effects depend, of course, on advertisements producing true beliefs, or at least not producing false beliefs, in consumers. Writers treat this as the issue of deception in advertising. The issue is not whether deceptive advertising is wrong (most would agree it is), but what counts as deceptive advertising, and what makes it wrong.

In the 1980s, Beech-Nut advertised as “100% apple juice” a drink that contained no juice of any kind. Beech-Nut was fined $2 million and two of its executives went to prison. As of this writing (in 2021), Red Bull is marketing its energy drinks with the slogan “Red Bull Gives You Wings,” but in fact Red Bull doesn’t give you wings. There is no problem with Red Bull’s marketing. What’s the difference? We might say that Red Bull’s slogan is not warranted as true (Carson 2010). It is an example of “puffery,” or over-the-top, exaggerated praise which no reasonable person takes seriously (Attas 1999). By contrast, Beech-Nut’s statement appeared to be a claim meant to be taken at face value, but in fact is false. As these examples illustrate, advertisements are deceptive not because of the truth-value of their claims, but what these claims cause reasonable consumers to believe. Questions can be raised, of course, about what it means to be reasonable (Scalet 2003); the answer may depend on who the consumers are.

Intention is usually taken to be irrelevant to deception in advertising. That is, an advertisement may be deemed deceptive even if the advertiser doesn’t intend to deceive anyone. Some philosophers would say that these advertisements are better described as misleading . (For discussion, see the entry on the definition of lying and deception .) Regulators of advertising blur this distinction, or perhaps they don’t care about it. Their goal is to protect consumers from acting on materially false beliefs, which may be caused either by deception or by blamelessly being misled.

Many reasons have been offered for why deceptive advertising is wrong. One is the Kantian claim that deceiving others is disrespectful to them, a use of them as a mere means. Deceptive advertising may also lead to harm, to consumers (who purchase suboptimal products, given their desires) and competitors (who lose out on sales). A final criticism of deceptive advertising is that it erodes trust in society (Attas 1999). When people do not trust each other, they will either not engage in economic transactions, or engage in them only with costly legal protections.

The persuasive component of advertising is also a fruitful subject of ethical inquiry. Galbraith (1958), an early critic, thinks that advertising, in general, does not inform people how to acquire what they want, but instead gives them new wants. He calls this the “dependence effect”: our desires depend on what is produced, not vice versa . Moreover, since we are inundated with advertising for consumer goods, we want too many of those goods and not enough public goods. Hayek (1961) rejects this claim, arguing that few if any of our desires are independent of our environment, and that anyway, desires produced in us through advertising are no less significant than desires produced in us in other ways.

Galbraith is concerned about the persuasive effects of advertisements. In contrast, recent writers focus on the techniques that advertisers use to persuade. Some of these are alleged to cross the line into manipulation (Aylsworth, 2020; Brenkert 2008; Sher 2011). It is difficult to define manipulation precisely, though attempts have been made (for extensive discussion, see the entry on the ethics of manipulation ). For our purposes, manipulative advertising can be understood as advertising that attempts to persuade consumers, often (but not necessarily) using non-rational means, to make irrational or suboptimal choices, given their own needs and desires.

Associative advertising is often identified as a type of manipulative advertising. In associative advertising, the advertiser tries to associate a product with a positive belief, feeling, attitude, ideal, or activity which usually has little to do with the product itself. Thus many television commercials for trucks in the U.S. associate trucks with manliness. Commercials for body fragrances associate those products with sex between beautiful people. The suggestion is that if you are a certain sort of person (e.g., a manly one), then you will have a certain sort of product (e.g., a truck). In an important article, Crisp (1987) argues that this sort of advertising attempts to create desires in people by circumventing their faculties of conscious choice, and in so doing subverts their autonomy (cf. Arrington 1982; Phillips 1994). Lippke (1989) argues that it makes people desire the wrong things, encouraging us to try to satisfy our non-market desires (e.g., to be more manly) through market means (e.g., buying a truck) (cf. Aylsworth 2020). How seriously we should take these criticisms may depend on how effective associative and other forms of persuasive advertising are. To the extent that advertisers are unsuccessful at “going around” our faculty of conscious choice, we may be less worried and more amused by their attempts to do so (Bishop 2000; Goldman 1984).

Our judgments on this issue should be context-sensitive. While most people may be able to see through advertisers’ attempts to persuade them, some may not be (at least some of the time). Paine (Paine et al. 1984) argues that advertising is justified because it helps consumers make wise decisions in the marketplace. But children, she argues, lack the capacity for making wise consumer choices (see also E.S. Moore 2004). Thus advertising directed at children constitutes a form of objectionable exploitation. Other populations who may be similarly vulnerable are the senile, the ignorant, and the bereaved. Ethics may require not a total ban on marketing to them but special care in how they are marketed to (Brenkert 2008; cf. Palmer & Hedberg 2013).

Sales are central to business. Perhaps surprisingly, business ethicists have said relatively little about sales.

An emerging set of issues concerns refusals to sell. Normally businesses want to sell their goods and services to everyone. But not always. In 2012, Jack Phillips of Masterpiece Cakeshop declined to sell a wedding cake to a same-sex couple because he opposed same-sex marriage on religious grounds. In response, the couple filed a complaint with the Colorado Civil Rights Commission. Should Phillips have sold the wedding cake to the couple? We might say that a commercial transaction is a kind of association, and people—including business owners like Phillips—should be free to associate, or not, with whomever they choose. Or we might say, as Phillips did, that his actions were protected by freedom of religion, since they were an expression of his identity, which includes his religious commitments. Alternatively, we might claim that Phillips was discriminating against the couple, and his actions were wrong for the same reasons discrimination typically is, viz., it denies people opportunities and undermines their dignity (Corvino, Anderson, & Girgis 2017).

Questions can also be raised about the techniques advertisers use to sell. These questions are similar to the ones asked about advertising. Salespeople are, in a sense, the final advertisers of products to consumers. An early contribution to the ethics of sales is found in Holley (1986), who develops a set of obligations for salespeople derived from the point of market activity, which he says is to efficiently meet people’s needs and wants (cf. Heath 2014). In what is probably the most sophisticated treatment of the subject, Carson (2010) says salespeople have at least the following four pro tanto duties: (1) provide customers with safety warnings and precautions; (2) refrain from lying and deception; (3) fully answer customers’ questions about items; and (4) refrain from steering customers toward purchases that are unsuitable for them, given their stated needs and desires. Carson justifies (1)—(4) by appealing to the golden rule: treat others as you want to be treated. He identifies two other duties that salespeople might have (he is agnostic): (5) do not sell customers products that you (the salesperson) think are unsuitable for them, given their needs and desires, without telling customers why you think this; and (6) do not sell customers poor quality or defective products, without telling them why you think this. For the most part, (1)—(4) ask the salesperson not to harm the customer; (5) and (6) ask the salesperson to help the customer, in particular, help her not to make foolish mistakes. The broader issue is one of disclosure (Holley 1998). How much information we think salespeople are required to share with customers may depend on what kind of relationship we think they should have, e.g., to what extent it is adversarial.

For many products bought and sold in markets, sellers offer an item at a certain price, and buyers take or leave that price. But in some cases there is negotiation over price (and other aspects of the transaction). We see this in the sale of “big ticket” items such as cars and houses, and in salaries for jobs. While there are many ethical issues that arise in negotiation, one issue that has received special attention is “bluffing”, or deliberately misstating one’s bargaining position. The locus classicus for this discussion is Carr (1968). According to him, bluffing in negotiations is permissible because business has its own distinctive set of moral rules and bluffing is permissible according to those rules. Carson (2010) agrees that bluffing is permissible in business, though in a more limited range of cases. Carson’s argument appeals to self-defense. If you have good reason to believe that your adversary in a negotiation is misstating her bargaining position, then you are permitted to misstate yours. A requirement to tell the truth in these circumstances would put you at a significant disadvantage relative to your adversary, which you are not required to suffer. An implication of Carson’s view is that you are not permitted to misstate your bargaining position if you do not have good reason to believe that your adversary is misstating hers.

In simplified models of the market, individual buyers and sellers are “price-takers”, not “price-makers”. That is, the prices of goods and services are set by the aggregate forces of supply and demand; no individual buys or sells a good for anything other than the market price. In reality, things are different. Sellers of goods have some flexibility about how to price goods.

Most business ethicists would accept that, in most cases, the prices at which products should be sold is a matter for private individuals to decide. This view has been defended on grounds of property rights. Some claim that if I have a right to a thing, then I am free to transfer that thing to you on whatever terms that I propose and you accept (Boatright 2010). It has also been defended on grounds of welfare. Prices set by voluntary exchanges reveal valuable information about the relative demand for and supply of goods, allowing resources to flow to their most productive uses (Hayek 1945). Despite this, most business ethicists also recognize some limits on prices.

One issue that has received increasing attention is price discrimination. This is discrimination based on willingness to pay, or the practice of charging more to people who are willing to pay more. This might at first seem unfair or even exploitative, but in fact it is commonplace and usually unremarkable (Elegido 2011; Marcoux 2006a). Examples of price discrimination include senior and student discounts, bulk discounts, versioning, and the sort of bargaining one finds in car dealerships and flea markets. We might see price discrimination as an implication of freedom in pricing, and according to a familiar result in economics, price discrimination increases social welfare, provided that it enables producers to increase output (Varian 1985). But some instances of price discrimination have come in for criticism. Online retailers collect and purchase enormous amounts of information about consumers, and there is evidence that they are using this to personalize prices, or tailor prices to what they think are consumers’ reservation prices, i.e., the highest amounts they are willing to pay. Some believe that this practice is unfair (Steinberg 2020), though they problem may simply be that consumers don’t know what retailers are up to.

Another issue of pricing ethics is price gouging. Price gouging can be understood as a sharp increase in the price of a necessary good in the wake of an emergency which renders that good scarce (Hughes 2020; Zwolinski 2008). As the novel coronavirus spread around the world in early 2020, retailers began to charge extremely high prices for cleaning products and medical supplies. Many jurisdictions have laws against price gouging, and it is widely regarded as unethical (Snyder 2009). The reason is that it is a paradigm case of exploitation: A extracts an excessive benefit out of B in circumstances in which B cannot reasonably refuse A ’s offer (Valdman 2009). But some theorists defend price gouging. While granting that sales of items in circumstances like these are exploitative, they note that they are mutually beneficial. Both the seller and buyer prefer to engage in the transaction rather than not engage in it. Moreover, when items are sold at inflated prices, this both limits hoarding and attracts more sellers into the market. Permitting price gouging may thus be the fastest way of eliminating it (Zwolinski 2008). (For further discussion, see the entry on exploitation .)

Most contemporary scholars believe that sellers have wide, though not unlimited, discretion in how much they charge for goods and services. But there is an older tradition in business ethics, found in Aquinas and other medieval scholars, according to which there is one price that sellers should charge: the “just price”. There is debate about what exactly medieval scholars meant by “just price”. According to a historically common interpretation, the just price is determined by the seller’s cost of production, i.e., the price that compensates the seller for the value of her labor and expenses. More recent interpretations understand the medieval just price at something closer to the market price, which may be more or less than the cost of production (Koehn & Wilbratte 2012).

6. Firms and workers

Business ethicists have written much about the relationship between employers and employees. Below we consider four issues at the employer/employee interface: (1) hiring and firing, (2) pay, (3) meaningful work, and (4) whistleblowing. Another important topic at this interface is privacy. For space reasons it will not be discussed, but see the entries on privacy and privacy and information technology .

Ethical issues in hiring and firing tend to focus on the question: What criteria should employers use, or not use, in employment decisions? The question of what criteria employers should not use is addressed in discussions of discrimination.

While there is some debate about whether discrimination in employment should be legally prohibited (see Epstein 1992), almost everyone agrees that it is morally wrong (Hellman 2008; Lippert-Rasmussen 2014). Discussion has focused on two questions. First, when does the use of a certain criterion in an employment decision count as discriminatory? It would seem wrong if Walmart were to exclude white applicants for a job in their marketing department, but not wrong if the Hovey Players (a theater troupe) were to exclude white applicants for the role of Walter Younger in A Raisin in the Sun . We might say that whether a hiring practice is discriminatory depends on whether the criterion used is job-relevant. But the concept of job-relevance is contested, as the case of “reaction qualifications” reveals. Suppose that white diners prefer to be served by white waiters rather than black waiters. In this case race seems job-relevant, but it seems wrong for employers to take race into account (Mason 2017). Another question that has received considerable attention is: What makes discrimination wrong? Some argue that discrimination is wrong because of its effects on those who are discriminated against (Lippert-Rasmussen 2014); others think that it is wrong because of what it expresses to them (Hellman 2008). (For extensive discussion, see the entry on discrimination .)

Some writers believe that employers’ obligations are not satisfied simply by avoiding using certain criteria in hiring decisions. According to them, employers have a duty to hire the most qualified applicant. Some justify this duty by appealing to considerations of desert (D. Miller 1999; Mulligan 2018); others justify it by appealing to equal opportunity (Mason 2006). We might object to this view by appealing to property rights. A job offer typically implies a promise to pay the job-taker a sum of your money for performing certain tasks. While we might think that excluding some ways you can dispose of your property (e.g., rules against discrimination in hiring) can be justified, we might think that excluding all ways but one (viz., a requirement to hire the most qualified applicant) is unjustified. In support of this, we might think that a small business owner does nothing wrong when she hires her daughter for a part-time job as opposed to a more qualified stranger.

The question of when employees may be fired is a staple of business ethics texts and was the subject of considerable debate in the business ethics literature in the 1980’s and 1990’s. There are two main views: those who think that employment should be “at will”, so that an employer can terminate an employee for any reason (Epstein 1984; Maitland 1989), and those who think that employers should be able to terminate employees only for “just cause” (e.g., poor performance or excessive absenteeism) (McCall & Werhane 2010). In fact, few writers hold the “pure” version of the “at will” view. Most would say, and the law agrees, that it is wrong for an employer to terminate an employee for certain reasons, e.g., a discovery that he is Muslim or his refusal to commit a crime for the employer. Thus the debate is between those who think that employers should be able to terminate employees for any reason with some exceptions , and those who think that employers should be able to terminate employees only for certain reasons. In the U.S., most employees are at will, while in Europe, most employees are covered, after a probationary period, by something analogous to just cause. Arguments for just cause appeal to the effects that termination has on individual employees, especially those who have worked for an employer for many years (McCall & Werhane 2010). Arguments for at will employment appeal to freedom or macroeconomic effects. It is claimed, in the former case, that just cause is an unwarranted restriction on employers’ and employees’ freedom of contract (Epstein 1984), and in the latter case, that it raises the unemployment rate (Maitland 1989). The more difficult it is for an employer to fire an employee, the more reluctant she will be to hire one in the first place.

Businesses generate revenue, and some of this revenue is distributed to employees in the form of compensation, or pay. Since the demand for pay typically exceeds the supply, the question of how pay should be distributed is naturally analyzed as a problem of justice.

Two theories of justice in pay have attracted attention. One may be called the “agreement view”. According to it, a just wage is whatever wage the employer and the employee agree to without force or fraud (Boatright 2010). This view is sometimes justified in terms of property rights. Employees own their labor, and employers own their capital, and they are free, within broad limits, to dispose of it as they please. In addition, we might think that wages should be should determined by voluntary agreement for the same reason prices generally should be, viz., it allocates resources to their most productive uses, as determined by people’s wants (Heath 2018; Hayek 1945). A “wage”, after all, is just a special name for the price of labor.

A second view of wages may be called the “contribution view”. According to it, the just wage for a worker is the wage that reflects her contribution to the firm. This view comes in two versions. On the absolute version, workers should receive an amount of pay that equals the value of their contributions to the firm (D. Miller 1999). On the comparative version, workers should receive an amount of pay that reflects the relative value of their contributions to the firm, given what others in the firm contribute and are paid (Sternberg 2000). The contribution view strikes some as normatively basic, a view for which no further argument can be given (D. Miller 1999). An analogy may be drawn with punishment. Just as it seems intuitively right for the severity of a criminal’s punishment to reflect the seriousness of her crime, so it may seem intuitively right for the value of a persons’s pay to reflect the value of her work (Moriarty 2016). In this way, pay might be understood as a reward for work.

Some argue that compensation should be evaluated not only as a problem of justice but as an incentive. The question here is what pay encourages employees to do, and how it encourages them to do it. Poorly structured compensation packages for traders in the financial services industry are thought to have contributed to the financial crisis of 2007-2009 (Kolb 2012). Traders were incentivized to take excessively risky bets, and when those bets went bad, their firms could not cover the losses, putting the firms and ultimately the whole financial system in peril. Bad incentives may also help to explain the recent account fraud scandal at Wells Fargo.

The pay of any employee can be evaluated from a moral point of view. But business ethicists have paid particular attention to the pay of certain employees, viz., CEOs and workers in factories in developing countries, often called “sweatshops.”

There has been significant debate about whether CEOs are paid too much (Boatright, 2010; Moriarty 2005), with scholars falling into two camps. Those in the “managerial power” camp believe that CEOs wield power over boards of directors, and use this power to extract above-market rents from their firms (Bebchuk & Fried 2004). Those in the “efficient contracting” camp believe that pay negotiations between CEOs and boards are usually carried out at arm’s-length, and that CEOs’ large compensation packages reflect their rare and valuable skills. (For a recent survey of relevant empirical issues, see Edmans, Gabaix, & Jenter 2017).

There has also been a robust debate about whether workers in sweatshops are paid too little. Some say ‘no’ (Powell & Zwolinski 2012; Zwolinski 2007). They say that sweatshops wages, while low by standards in developed countries, are not low by the standards of the countries in which the sweatshops are located. This explains why people choose to work in a sweatshop; it is the best offer they have. Efforts to increase artificially the wages of sweatshop workers, according to these writers, is misguided on two counts. First, it is an interference with the autonomous choices of employers and workers. Second, it is likely to make workers worse off, since employers will respond by either moving operations to a new location or employing fewer workers in that location (cf. Kates 2015). These writers sometimes appeal to a principle of “nonworseness,” according to which a consensual, mutually beneficial interaction (of the sort sweatshop owners and workers engage in) cannot be worse than its absence. Other writers challenge these claims. While granting that workers choose to work in sweatshops, they deny that their choices are truly voluntary (Arnold & Bowie 2003; Kates 2015). Given their low wages, this suggests that sweatshop workers are wrongfully exploited (Faraci 2019). Moreover, some argue, firms can and should do more for sweatshop workers, on grounds on fairness or beneficence (Snyder 2010). These writers invoke a principle of “interaction,” according to which people involved in a certain relationship (of the sort sweatshop owners and workers are engaged in) must live up to certain standards of conduct (which exploitation is alleged to fall below). In response to the claim that firms put themselves at a competitive disadvantage if they do, writers have pointed to actual cases where firms have been able to secure better treatment for sweatshop workers without suffering serious financial penalties (Hartman, Arnold, & Wokutch 2003). (For further discussion, see the entry on exploitation .)

Smith (1776 [1976]) famously observed that a detailed division of labor greatly increases the productivity of manufacturing processes. To use his example: if one worker performs all of the tasks required to make a pin himself—18, we are told—he can make just a few pins per day. However, if the worker specializes in one or two of these tasks, and combines his efforts with other workers who specialize in one or two of the other tasks, then together they can make thousands of pins per day. But according to Smith, there is human cost to the detailed division of labor. Performing one or two simple tasks all day makes a worker “as stupid and ignorant as it is possible for a human creature to become” (Smith 1776 [1976]: V.1.178).

To avoid this result, some call for work to be made more “meaningful”. In this sense, a call for meaningful work is not a call for work to be more “important”, i.e., to contribute to the production of a good or service that is objectively valuable, or that workers believe is valuable (cf. Michaelson 2021; Veltman 2016). Instead, it is a call for labor processes to be arranged so that work is interesting, requires skill, and gives workers substantial decision-making power (Arneson 1987; Roessler 2012; Schwartz 1982).

Smith’s insight that labor processes are more efficient when they are divided into meaningless segments leads some writers to believe that, in a competitive economy, firms will not provide as much meaningful work as workers want (Werhane 1985). In response, it has been argued that there is a market for labor, and if workers want meaningful work, then employers have an incentive to provide it (Maitland 1989; Nozick 1974). According to this argument, insofar as we see “too little” meaningful work on offer, this is because workers prefer not to have it—or more precisely, because workers are willing to trade meaningfulness for other benefits, such as higher wages.

The above argument treats meaningful work as a matter of preference, as a job amenity that employers can decline to offer or that workers can trade away (cf. Yeoman 2014). Others resist this understanding. According to Schwartz (1982), employers are required to offer employees meaningful work, and employees are required to perform it, out of respect for autonomy (see also Bowie 2017). The idea is that the autonomous person makes choices for herself; she does not mindlessly follow others’ directions. A difficulty for this argument is that respect for autonomy does not seem to require that we make all choices for ourselves. A person might, it seems, autonomously choose to allow important decisions to be made for her in certain spheres of her life, e.g., by a coach, a family member, a medical professional, or a military commander.

A potential problem for this response brings us back to Smith, and to “formative” arguments for meaningful work. The problem, according to some writers, is that if most of a person’s day is given over to meaningless tasks, then her capacity for autonomous choice, and perhaps her other intellectual faculties, may deteriorate. A call for meaningful work may be understood as a call for workplaces to be arranged so that this deterioration does not occur (Arneson 2009; Arnold 2012; Yeoman 2014). In addition to Smith, Marx (1844 [2000]) was concerned about the effects of work on human flourishing.

Formative arguments face at least two difficulties, one empirical and one normative. The empirical difficulty is establishing the connection between meaningless work and autonomous choice (or another intellectual faculty). More evidence is needed. The normative difficulty is that formative arguments make certain assumptions about the nature of the good and the state’s role in promoting it. They assume that it is better for people to have fully developed faculties of autonomous choice (etc.) and that the state should help to develop them. These assumptions might be challenged, e.g., by liberal neutralists (Roessler 2012; Veltman 2016). Yeoman (2014) seeks to surmount this challenge—and make meaningful work safe for liberal political theory—by conceptualizing meaningful work as a fundamental human need, not a mere preference.

Suppose you discover, as Tyler Shultz did at Theranos in 2015, that your firm is deceiving regulators and investors about the efficacy of its products. To stop this, one thing you might do is “blow the whistle” by disclosing this information to a third party. While scholars give different definitions of whistleblowing (see, e.g., Brenkert 2010; Davis 2003; DeGeorge 2009; Delmas 2015), the following elements are usually present: (1) insider status, (2) non-public information, (3) illegal or immoral activity, (4) avoidance of the usual chain of command in the firm, (5) intention to solve the problem. In the above example, Shultz was a whistleblower because he was (1) a Theranos employee (2) who disclosed non-public information (3) about illegal activity in the firm (4) to a state regulator (5) in an effort to stop that activity.

Debate about whistleblowing tends to focus on the question of when whistleblowing is justified—in the sense of when it is permissible, or when it is required. This debate assumes that whistleblowing requires justification, or is wrong, other things equal. Many business ethicists make this assumption on the grounds that employees have a pro tanto duty of loyalty to their firms (Elegido 2013). Against this, some argue that the relationship between the firm and the employee is purely transactional—an exchange of money for labor (Duska 2000)—and so is not normatively robust enough to ground a duty of loyalty. (For a discussion of this issue, see the entry on loyalty .)

One prominent justification of whistleblowing is due to DeGeorge (2009). According to him, it is permissible for an employee to blow the whistle when his doing so will prevent harm to society. (In a similar account, Brenkert [2010] says that the duty to blow the whistle derives from a duty to prevent wrongdoing.) The duty to prevent harm can have more weight, if the harm is great enough, than the duty of loyalty. To determine whether whistleblowing is not simply permissible but required, DeGeorge says, we must take into account the likely success of the whistleblowing and its effects on the whistleblower himself. Humans are tribal creatures, and whistleblowers are often treated badly by their colleagues. (Shultz and his family were hounded by Theranos’s powerful and well-connected lawyers, at a cost to them of hundreds of thousands of dollars.) So if whistleblowing is unlikely to succeed, then it need not be attempted. The lack of a moral requirement to blow the whistle in these cases can be seen as a specific instance of the rule that individuals need not make huge personal sacrifices to promote others’ interests, even when those interests are important.

Another account of whistleblowing is given by Davis (2003). Like Brenkert (and unlike DeGeorge), Davis focuses on the wrongdoing that the firm engages in (not the harm it causes). According to Davis, however, the point of whistleblowing is not so much to prevent the wrongdoing but to avoid one’s own complicity in it. He says that an employee is required to blow the whistle on her firm when she believes that it is engaged in seriously wrongful behavior, and her work for the firm “will contribute … to the wrong if … [she] [does] not publicly reveal what [she knows]” (2003: 550). Davis’s account limits whistleblowers to people who are currently firm insiders. Many find this counterintuitive, since it implies that people often described as whistleblowers, like Jeffrey Wigand (Brown & Williamson) and Edward Snowden (NSA), are not actually whistleblowers.

7. The firm in society

Business activity and business entities have an enormous impact on society. One way that businesses impact society, of course, is by producing goods and services and by providing jobs. But businesses can also impact society by trying to solve social problems and by using their resources to influence governments’ laws and regulations.

“Corporate social responsibility”, or CSR, is typically understood as actions by businesses that are (i) not legally required, and (ii) intended to benefit parties other than the corporation (where benefits to the corporation are understood in terms of return on equity, return on assets, or some other measure of financial performance). The parties who benefit may be more or less closely associated with the firm itself; they may be the firm’s own employees or people in distant lands.

A famous example of CSR involves the pharmaceutical company Merck. In the late 1970s, Merck was developing a drug to treat parasites in livestock, and it was discovered that a version of the drug might be used treat Onchocerciasis, or river blindness, a disease that causes debilitating itching, pain, and eventually blindness in people. The problem was that the drug would cost hundreds of millions of dollars to develop, and would generate little or no revenue for Merck, since the people usually afflicted with river blindness were too poor to afford it. Ultimately Merck decided to develop the drug. As expected, it was effective in treating river blindness, but Merck made no money from it. As of this writing in 2021, Merck, now in concert with several nongovernmental organizations, continues to manufacture and distribute the drug throughout the developing world for free.

The scholarly literature on CSR is dominated by social scientists. Their question is typically whether, when, and how socially responsible actions benefit firms financially. The conventional wisdom is that there is a slight positive correlation between corporate social performance and corporate financial performance, but it is unclear which way the causality goes (Vogel 2005; Zhao & Murrell 2021). That is, it is not clear whether prosocial behavior by firms causes them to be rewarded financially (e.g., by consumers who value their behavior), or whether financial success allows firms to engage in more prosocial behaviors (e.g., by freeing up resources that would otherwise be spent on core business functions).

Many writers connect the debate about CSR with the debate about the ends of corporate governance. Thus Friedman (1970) objects to CSR, saying that managers should be maximizing shareholder wealth instead. (Friedman also thinks that CSR is a usurpation of the democratic process and often wasteful, since managers aren’t experts in solving social problems.) Stakeholder theory (Freeman et al. 2010) is thought to be more accommodating of prosocial activity by firms, since it permits firms to do things other than increase shareholder wealth.

We do not need, however, to see the debate about CSR a debate about the proper ends of corporate governance. We can see it as a debate about the nature and scope of firms’ moral duties, i.e., what obligations (e.g., of rescue or beneficence) they must discharge, whatever their goals are (Hsieh 2004; Mejia 2020).

Many writers give broadly consequentialist reasons for CSR. The arguments tend to go as follows: (1) there are serious problems in the world, such as poverty, conflict, environmental degradation, and so on; (2) any agent with the resources and knowledge necessary to ameliorate these problems has a moral responsibility to do so, assuming the costs they incur on themselves are not excessively high; (3) firms have the resources and knowledge necessary to ameliorate these problems without incurring excessively high costs; therefore, (4) firms should ameliorate these problems (Dunfee 2006a).

The view that someone should do something about the world’s problems seems true to many people. Not only is there an opportunity to increase social welfare by alleviating suffering, suffering people may also have a right to assistance. The controversial issue is who should do something to help, and how much they should do. Thus defenders of the above argument focus most of their attention on establishing that firms have these duties, against those who say that these duties are properly assigned to states or individuals. O. O’Neill (2001) and Wettstein (2009) argue that firms are “agents of justice”, much like states and individuals, and have duties to aid the needy (see also Young 2011). Strudler (2017) legitimates altruistic behavior by firms by undermining the claim that shareholders own them, and so are owed their surplus wealth. Hsieh (2004) says that, even if we concede that firms do not have social obligations, individuals have them, and the best way for many individuals to discharge them is through the activities of firms (see also McMahon 2013; Mejia 2020).

Debates about CSR are not just debates about whether specific social ills should be addressed by specific corporations. They are also debates about what sort of society we want to live in. While acknowledging that firms benefit society through CSR, Brenkert (1992) thinks it is a mistake for people to encourage firms to engage in CSR as a practice. When we do so, he says, we cede a portion of the public sphere to private actors. Instead of deciding together how we want to ameliorate social ills affecting our fellow community members, we leave it up to private organizations to decide what to do. Instead of sharpening our skills of democracy through deliberation and collective decision-making, and reaffirming social bonds through mutual aid, we allow our skills and bonds to atrophy through disuse.

Many businesses are active participants in the political arena. They support candidates for election, defend positions in public debate, lobby government officials, and more. What should be said about these activities?

Social scientists have produced a substantial literature on corporate political activity (CPA) (for a review, see Lawton, McGuire, & Rajwani 2013). This research focuses on such questions as: What forms does CPA take? What are the antecedents of CPA? What are its consequences? CPA raises many normative questions as well.

We might begin by asking why corporations should be allowed to engage in political activity at all. In a democratic society, freedom of expression is both a right and a value (Stark 2010). People have a right to participate in the political process by supporting candidates for public office, defending positions in public debate, and so on. It is generally a good thing when they exercise this right, since they can introduce new facts and arguments into public discourse. People can engage in political activity individually, but in a large society, they may find it useful to do so in groups. The firm might be seen as one of these groups. Indeed, we might think it is especially important that firms engage in (at least some forms of) political activity. Society has an interest in knowing how proposed economic policies will affect firms; firms themselves are a good source of information.

But political activity by corporations has come in for criticism. One concern focuses on what corporations’ goals are. Some worry that firms engage in CPA in order to advance their own interests at the expense of their competitors’ or the public’s. This activity is sometimes described, and condemned, as “rent-seeking” (Jaworski 2014; Tullock 1989). Questions have been raised about the nature and value of rent-seeking. According to a common definition, rent-seeking is socially wasteful economic activity intended to secure benefits from the state rather than the market. But there is disagreement about what counts as waste. Lobbying for subsidies, or tariffs on foreign competitors, are classic cases of rent-seeking. But subsidies for (e.g.) corn might help to secure a nation’s food supply, and tariffs on (e.g.) foreign steel manufacturers might help a nation to protect itself in a time of war (Boatright 2009; Hindmoor 1999). One person’s private rent-seeking is another’s public benefit.

A second concern about CPA is that it can undermine the ideal of equality at the heart of democracy (Christiano 2010). Some corporations have a lot of money, and this can be translated into a lot of power. In 2010, the state of Indiana passed a law—the Religious Freedom Restoration Act (RFRA)—that appeared to give employers the freedom to discriminate against LGBTQ people on religious grounds. In response, Salesforce and Angie’s List cancelled plans to expand in the state, and threatened to leave it altogether. Indiana quickly convened a special session of its legislature and announced that the new law did not in fact give employers this freedom. By contrast, if the average Indianan told the legislature that they might leave the state because of the RFRA, the legislature would not have cared. This objection to CPA is also an objection to political activity by powerful groups like the National Rifle Association (NRA) or the American Civil Liberties Union (ACLU) and individuals like Charles Koch or Tom Steyer.

A third objection to CPA is more narrowly targeted. According to it, corporations are not the right type of entities to engage in political activity (Hussain & Moriarty 2018). The key issue is representation. Organizations like the NRA and ACLU are legitimate participants in the political arena because they represent their members in political debate, and people join or leave them based on political considerations. By contrast, business organizations have no recognized role to play in the political system, and people join or leave them for economic reasons, not political ones. On this criticism, corporate political activity should be conceptualized not as a collective effort by all of the corporation’s members to speak their minds about a shared concern, but as an effort by a small group of powerful owners or executives to use the corporation’s resources to advance their own personal ends.

Traditionally CPA goes “through” the formal political process, e.g., contributing to political campaigns or lobbying government officials. But increasingly firms are engaging in what appears to be political activity that goes “around” or “outside” of this process, especially in circumstances in which the state is weak, corrupt, or incompetent. They do this through the provision of public goods and infrastructure (Ruggie 2004) and the creation of systems of private regulation or “soft law” (Vogel 2010). For example, when the Rana Plaza collapsed in Bangladesh in 2013, killing more than 1100 garment industry workers, new building codes and systems of enforcement were put into place. But they were put into place by the multinational corporations that are supplied by factories in Bangladesh, not by the government of Bangladesh. This kind of activity is sometimes called “political CSR,” since it is a kind of CSR that produces a political outcome (Scherer & Palazzo 2011). We might call it CPA “on steroids”. Instead of influencing political outcomes, corporations bring them about almost single-handedly. This is a threat to democratic self-rule. Some writers have explored whether it can be ameliorated through multi-stakeholder initiatives (MSIs), or governance systems that bring together firms, non-governmental organizations, and members of local communities to deliberate and decide on policy matters. Prominent examples include the Forest Stewardship Council (FSC), the Roundtable on Sustainable Palm Oil (RSPO), and the Extractive Industries Transparency Initiative (EITI) (Scherer & Palazzo 2011). Critics have charged that MSIs, while effective in producing dialog among stakeholders, are ineffective at holding firms to account (Hussain & Moriarty 2018; Moog, Spicer, & Böhm 2015).

There is another kind of corporate political activity. This is political activity whose target is corporations, known as “ethical consumerism” (for a review see Schwartz 2017). Consumers typically make choices based on quality and price. Ethical consumers (also) appeal to moral considerations. They may purchase, or choose not to purchase, goods from retailers who make their products in certain countries or who support certain political causes. These can be described as political activities because consumers are using their economic power to achieve political ends. It is difficult for consumer actions against, or in support of, firms to succeed, since they require coordinating the actions of many individuals. But consuming ethically may be important for personal integrity. You might say that you cannot in good conscience shop at a retailer who is working, in another arena, against your deeply-held values. One concern about ethical consumerism is that it may be a form of vigilantism (Hussain 2012; cf. Barry & MacDonald 2018), or mob justice. Another is that it is yet another way that people can self-segregate by moral and political orientation as opposed to finding common ground.

Many businesses operate across national boundaries. These are typically called “multinational” or “transnational” firms (MNCs or TNCs). Operating internationally heightens the salience of a number of the ethical issues discussed above, such as CSR, but it also raises new issues, such as relativism and divestment. Two issues often discussed in connection with international business are not treated in this section. One is wages and working conditions in sweatshops. This literature is briefly discussed in section 6.2 . The second issue is corruption, which is not discussed in this entry, for space reasons. But see the entry on corruption .

A number of business ethicists have developed ethical codes for MNCs, including DeGeorge (1993) and Donaldson (1989). International agencies have also created codes of ethics for business. Perhaps the most famous of these is the United Nations Global Compact, membership in which requires organizations to adhere to a variety of rules in the areas of human rights, labor, environment, and anti-corruption. In his important work for that body, Ruggie (2004, 2013) developed a “protect, respect, and remedy” framework for MNCs and human rights, which assigns the state the primary duty to protect human rights and remedy abuses of them, and firms the duty to respect human rights (cf. Wettstein 2009). A striking fact about much of this research is that, while it is focused on international business, and sometimes promulgated by international agencies, the conclusions reached do not apply specifically to firms doing business across national boundaries. The duty to, e.g., respect human rights applies to firms doing business within national boundaries too. It is simply that the international context is the one in which this duty seems most important to discharge, and in which firms are some of the few agents who can do so.

There are issues, however, that arise specifically for firms doing business internationally. Every introductory ethics student learns that different cultures have different moral codes. This is typically an invitation to think about whether or not morality is relative to culture. For the businessperson, it presents a more immediate challenge: How should cultural differences in moral codes be managed? In particular, when operating in a “host” country, should the businessperson adopt host country standards, or should she apply her “home” country standards?

Donaldson is a leading voice on this question, in work done independently (1989, 1996) and with Dunfee (1999). Donaldson and Dunfee argue that there are certain “moral minima” that must be met in all contexts. These are given to us by “hypernorms”, or universal moral values and rules, which are themselves justified by a “convergence of religious, philosophical, and cultural” belief systems (1999: 57). Within the boundaries set by hypernorms, Donaldson and Dunfee say, firms have “free space” to select moral standards. They do not have the liberty to select any standards they want; rather, their choices must be guided by the host country’s traditions and its current level of economic development. Donaldson and Dunfee call their approach “integrative social contracts theory” (ISCT), since they seek to merge norms derived from hypothetical contracts with norms that people have actually agreed to in particular societies.

ISCT has attracted a great deal of attention and many critics. Much of this criticism has focused on hypernorms, the criteria for which are alleged to be ad hoc (Scherer 2015), ambiguous (Brenkert 2009), and incomplete (Mayer & Cava 1995). Dunfee (2006b) collects and analyzes a decade worth of critical commentary on ISCT. For a more recent elaboration and defense of the approach, see Scholz, de los Reyes, and Smith (2019).

A complication for the debate about whether to apply home country standards in host countries is that multinational corporations engage in business across national boundaries in different ways. Some MNCs directly employ workers in multiple countries, while others contract with suppliers. Nike, for example, does not directly employ workers to make shoes. Rather, Nike designs shoes, and hires firms in other countries to make them. Our views about whether an MNC should apply home country standards in a host country may depend on whether the MNC is applying them to its own workers or to those of other firms.

The same goes for responsibility. MNCs, especially in consumer-facing industries, are often held responsible for poor working conditions in their suppliers’ factories. Nike was subject to sharp criticism for the labor practices of its suppliers in the 1990s (Hartman et al. 2003). Initially Nike pushed back, saying that those weren’t their factories, and so wasn’t their problem. Under mounting pressure, it changed course and promulgated a set of labor standards that it required all of its suppliers to meet, and now spends significant resources ensuring that they meet them (Hsieh, Toffel, & Hull 2019; Wokutch 2001). This is increasingly the approach Western multinationals take. Here again the response to the Rana Plaza tragedy is illustrative. What lengths companies should go to ensure the safety of workers in their supply chains is a question meriting further study (see Young 2011).

A businessperson may find that a host country’s standards are not just different than her home country’s standards, but morally intolerable. She may decide that the right course of action is not to do business in the country at all, and if she is invested in the country, to divest from it. The issue of divestment received substantial attention in the 1980s as MNCs were deciding whether or not to divest from South Africa under its Apartheid regime. It may attract renewed attention in the coming years as firms and other organizations contemplate divesting from the fossil fuel industry. Common reasons to divest from a morally problematic society or industry are to avoid complicity in immoral practices, and to put pressure on the society or industry to change its practices. Critics of divestment worry about the effects of divestment on innocent third parties (Donaldson 1989) and about the efficacy of divestment in forcing social change (Hudson 2005). Some believe that it is better for firms to stay engaged with the society or industry and try to bring about change from within—a policy of “constructive engagement”.

It is not hard to see why philosophers might be interested in business. Business activity raises a host of interesting philosophical issues: of agency, responsibility, truth, manipulation, exploitation, justice, beneficence, and more. After a surge of activity 40 years ago, however, philosophers seem to be gradually retreating from the field.

One explanation appeals to demand. Many of the philosophers who developed the field were hired into business schools, but after they retired, they were not replaced with other philosophers. Business schools have hired psychologists to understand why people engage in unethical behavior and strategists to explore whether ethics pays. These scholars fit better into the business school environment, which is dominated by social scientists. What social scientists do to advance our understanding of descriptive ethics is important, to be sure, but it is no substitute for normative reflection on what is ethical or unethical in business.

Another explanation for the retreat of philosophers from business ethics appeals to supply. There are hardly any philosophy Ph.D. programs that have faculty specializing in business ethics and, as a result, few new Ph.D.’s are produced in this area. Those who work in the area are typically “converts” from mainstream ethical theory and political philosophy. Some good news on this front is the recent increase in the number of normative theorists working on issues at the intersection of philosophy, politics, and economics (PPE). Many of the topics these scholars address—the value and limits of markets, the nature of the employment relationship, and the role of government in regulating commerce—are issues business ethicists care about. But PPE-style philosophers hardly cover the whole field of business ethics. There remain many urgent issues to address.

I hope this entry helps to inform philosophers and others about the richness and value of business ethics, and in doing so, generate greater interest in the field.

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How to cite this entry . Preview the PDF version of this entry at the Friends of the SEP Society . Look up topics and thinkers related to this entry at the Internet Philosophy Ontology Project (InPhO). Enhanced bibliography for this entry at PhilPapers , with links to its database.
  • Marcoux, Alexei, “Business Ethics”, The Stanford Encyclopedia of Philosophy (Fall 2016 Edition), Edward N. Zalta (ed.), URL = < https://plato.stanford.edu/archives/fall2016/entries/ethics-business/ >. [This was the previous entry on business ethics in the Stanford Encyclopedia of Philosophy — see the version history .]
  • A History of Business Ethics , by Richard T. De George (University of Kansas), an important early contributor to the field.
  • Society for Business Ethics , the main professional society for business ethicists, especially of the normative variety.

agency: shared | corruption | discrimination | economics [normative] and economic justice | ethics: virtue | exploitation | feminist philosophy, topics: perspectives on class and work | information technology: and privacy | intentionality: collective | justice: distributive | justice: global | Kant, Immanuel: moral philosophy | loyalty | lying and deception: definition of | manipulation, ethics of | markets | moral relativism | perfectionism, in moral and political philosophy | privacy | property and ownership | Rawls, John | responsibility: collective | rights | rights: human

Acknowledgments

For helpful suggestions on this entry (and the previous version), I thank Dorothea Baur, George Brenkert, Jason Brennan, Matt Caulfield, David Dick, Anca Gheaus, Keith Hankins, Edwin Hartman, Laura Hartman, Lisa Herzog, David Jacobs, Woon Hyuk Jay Jang, Peter Jaworski, Xavier Landes, Chris MacDonald, Emilio Marti, Dominic Martin, Pierre-Yves Néron, Eric Orts, Katinka Quintelier, Sareh Pouryousefi, Amy Sepinwall, Kenneth Silver, Abraham Singer, Alejo José G. Sison, Cindy Stark, Chris Surprenant, Kevin Vallier, and Hasko von Kriegstein.

Copyright © 2021 by Jeffrey Moriarty < jmoriarty @ bentley . edu >

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What Are Business Ethics & Why Are They Important?

Business professional pressing a graphic that reads "Business Ethics" and is surrounded by icons

  • 27 Jul 2023

From artificial intelligence to facial recognition technology, organizations face an increasing number of ethical dilemmas. While innovation can aid business growth, it can also create opportunities for potential abuse.

“The long-term impacts of a new technology—both positive and negative—may not become apparent until years after it’s introduced,” says Harvard Business School Professor Nien-hê Hsieh in the online course Leadership, Ethics, and Corporate Accountability . “For example, the impact of social media on children and teenagers didn’t become evident until we watched it play out over time.”

If you’re a current or prospective leader concerned about navigating difficult situations, here's an overview of business ethics, why they're important, and how to ensure ethical behavior in your organization.

Access your free e-book today.

What Are Business Ethics?

Business ethics are principles that guide decision-making . As a leader, you’ll face many challenges in the workplace because of different interpretations of what's ethical. Situations often require navigating the “gray area,” where it’s unclear what’s right and wrong.

When making decisions, your experiences, opinions, and perspectives can influence what you believe to be ethical, making it vital to:

  • Be transparent.
  • Invite feedback.
  • Consider impacts on employees, stakeholders, and society.
  • Reflect on past experiences to learn what you could have done better.

“The way to think about ethics, in my view, is: What are the externalities that your business creates, both positive and negative?” says Harvard Business School Professor Vikram Gandhi in Leadership, Ethics, and Corporate Accountability . “And, therefore, how do you actually increase the positive element of externalities? And how do you decrease the negative?”

Related: Why Managers Should Involve Their Team in the Decision-Making Process

Ethical Responsibilities to Society

Promoting ethical conduct can benefit both your company and society long term.

“I'm a strong believer that a long-term focus is what creates long-term value,” Gandhi says in Leadership, Ethics, and Corporate Accountability . “So you should get shareholders in your company that have that same perspective.”

Prioritizing the triple bottom line is an effective way for your business to fulfill its environmental responsibilities and create long-term value. It focuses on three factors:

  • Profit: The financial return your company generates for shareholders
  • People: How your company affects customers, employees, and stakeholders
  • Planet: Your company’s impact on the planet and environment

Check out the video below to learn more about the triple bottom line, and subscribe to our YouTube channel for more explainer content!

Ethical and corporate social responsibility (CSR) considerations can go a long way toward creating value, especially since an increasing number of customers, employees, and investors expect organizations to prioritize CSR. According to the Conscious Consumer Spending Index , 67 percent of customers prefer buying from socially responsible companies.

To prevent costly employee turnover and satisfy customers, strive to fulfill your ethical responsibilities to society.

Ethical Responsibilities to Customers

As a leader, you must ensure you don’t mislead your customers. Doing so can backfire, negatively impacting your organization’s credibility and profits.

Actions to avoid include:

  • Greenwashing : Taking advantage of customers’ CSR preferences by claiming your business practices are sustainable when they aren't.
  • False advertising : Making unverified or untrue claims in advertisements or promotional material.
  • Making false promises : Lying to make a sale.

These unethical practices can result in multi-million dollar lawsuits, as well as highly dissatisfied customers.

Ethical Responsibilities to Employees

You also have ethical responsibilities to your employees—from the beginning to the end of their employment.

One area of business ethics that receives a lot of attention is employee termination. According to Leadership, Ethics, and Corporate Accountability , letting an employee go requires an individualized approach that ensures fairness.

Not only can wrongful termination cost your company upwards of $100,000 in legal expenses , it can also negatively impact other employees’ morale and how they perceive your leadership.

Ethical business practices have additional benefits, such as attracting and retaining talented employees willing to take a pay cut to work for a socially responsible company. Approximately 40 percent of millennials say they would switch jobs to work for a company that emphasizes sustainability.

Ultimately, it's critical to do your best to treat employees fairly.

“Fairness is not only an ethical response to power asymmetries in the work environment,” Hsieh says in the course. “Fairness—and having a successful organizational culture–can benefit the organization economically and legally.”

Leadership, Ethics, and Corporate Accountability | Develop a toolkit for making tough leadership decisions| Learn More

Why Are Business Ethics Important?

Failure to understand and apply business ethics can result in moral disengagement .

“Moral disengagement refers to ways in which we convince ourselves that what we’re doing is not wrong,” Hsieh says in Leadership, Ethics, and Corporate Accountability . “It can upset the balance of judgment—causing us to prioritize our personal commitments over shared beliefs, rules, and principles—or it can skew our logic to make unethical behaviors appear less harmful or not wrong.”

Moral disengagement can also lead to questionable decisions, such as insider trading .

“In the U.S., insider trading is defined in common, federal, and state laws regulating the opportunity for insiders to benefit from material, non-public information, or MNPI,” Hsieh explains.

This type of unethical behavior can carry severe legal consequences and negatively impact your company's bottom line.

“If you create a certain amount of harm to a society, your customers, or employees over a period of time, that’s going to have a negative impact on your economic value,” Gandhi says in the course.

This is reflected in over half of the top 10 largest bankruptcies between 1980 and 2013 that resulted from unethical behavior. As a business leader, strive to make ethical decisions and fulfill your responsibilities to stakeholders.

How to Implement Business Ethics

To become a more ethical leader, it's crucial to have a balanced, long-term focus.

“It's very important to balance the fact that, even if you're focused on the long term, you have to perform in the short term as well and have a very clear, articulated strategy around that,” Gandhi says in Leadership, Ethics, and Corporate Accountability .

Making ethical decisions requires reflective leadership.

“Reflecting on complex, gray-area decisions is a key part of what it means to be human, as well as an effective leader,” Hsieh says. “You have agency. You must choose how to act. And with that agency comes responsibility.”

Related: Why Are Ethics Important in Engineering?

Hsieh advises asking the following questions:

  • Are you using the “greater good” to justify unethical behavior?
  • Are you downplaying your actions to feel better?

“Asking these and similar questions at regular intervals can help you notice when you or others may be approaching the line between making a tough but ethical call and justifying problematic actions,” Hsieh says.

How to Become a More Effective Leader | Access Your Free E-Book | Download Now

Become a More Ethical Leader

Learning from past successes and mistakes can enable you to improve your ethical decision-making.

“As a leader, when trying to determine what to do, it can be helpful to start by simply asking in any given situation, ‘What can we do?’ and ‘What would be wrong to do?’” Hsieh says.

Many times, the answers come from experience.

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  • Ethical Considerations in Research | Types & Examples

Ethical Considerations in Research | Types & Examples

Published on October 18, 2021 by Pritha Bhandari . Revised on June 22, 2023.

Ethical considerations in research are a set of principles that guide your research designs and practices. Scientists and researchers must always adhere to a certain code of conduct when collecting data from people.

The goals of human research often include understanding real-life phenomena, studying effective treatments, investigating behaviors, and improving lives in other ways. What you decide to research and how you conduct that research involve key ethical considerations.

These considerations work to

  • protect the rights of research participants
  • enhance research validity
  • maintain scientific or academic integrity

Table of contents

Why do research ethics matter, getting ethical approval for your study, types of ethical issues, voluntary participation, informed consent, confidentiality, potential for harm, results communication, examples of ethical failures, other interesting articles, frequently asked questions about research ethics.

Research ethics matter for scientific integrity, human rights and dignity, and collaboration between science and society. These principles make sure that participation in studies is voluntary, informed, and safe for research subjects.

You’ll balance pursuing important research objectives with using ethical research methods and procedures. It’s always necessary to prevent permanent or excessive harm to participants, whether inadvertent or not.

Defying research ethics will also lower the credibility of your research because it’s hard for others to trust your data if your methods are morally questionable.

Even if a research idea is valuable to society, it doesn’t justify violating the human rights or dignity of your study participants.

Prevent plagiarism. Run a free check.

Before you start any study involving data collection with people, you’ll submit your research proposal to an institutional review board (IRB) .

An IRB is a committee that checks whether your research aims and research design are ethically acceptable and follow your institution’s code of conduct. They check that your research materials and procedures are up to code.

If successful, you’ll receive IRB approval, and you can begin collecting data according to the approved procedures. If you want to make any changes to your procedures or materials, you’ll need to submit a modification application to the IRB for approval.

If unsuccessful, you may be asked to re-submit with modifications or your research proposal may receive a rejection. To get IRB approval, it’s important to explicitly note how you’ll tackle each of the ethical issues that may arise in your study.

There are several ethical issues you should always pay attention to in your research design, and these issues can overlap with each other.

You’ll usually outline ways you’ll deal with each issue in your research proposal if you plan to collect data from participants.

Voluntary participation means that all research subjects are free to choose to participate without any pressure or coercion.

All participants are able to withdraw from, or leave, the study at any point without feeling an obligation to continue. Your participants don’t need to provide a reason for leaving the study.

It’s important to make it clear to participants that there are no negative consequences or repercussions to their refusal to participate. After all, they’re taking the time to help you in the research process , so you should respect their decisions without trying to change their minds.

Voluntary participation is an ethical principle protected by international law and many scientific codes of conduct.

Take special care to ensure there’s no pressure on participants when you’re working with vulnerable groups of people who may find it hard to stop the study even when they want to.

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Informed consent refers to a situation in which all potential participants receive and understand all the information they need to decide whether they want to participate. This includes information about the study’s benefits, risks, funding, and institutional approval.

You make sure to provide all potential participants with all the relevant information about

  • what the study is about
  • the risks and benefits of taking part
  • how long the study will take
  • your supervisor’s contact information and the institution’s approval number

Usually, you’ll provide participants with a text for them to read and ask them if they have any questions. If they agree to participate, they can sign or initial the consent form. Note that this may not be sufficient for informed consent when you work with particularly vulnerable groups of people.

If you’re collecting data from people with low literacy, make sure to verbally explain the consent form to them before they agree to participate.

For participants with very limited English proficiency, you should always translate the study materials or work with an interpreter so they have all the information in their first language.

In research with children, you’ll often need informed permission for their participation from their parents or guardians. Although children cannot give informed consent, it’s best to also ask for their assent (agreement) to participate, depending on their age and maturity level.

Anonymity means that you don’t know who the participants are and you can’t link any individual participant to their data.

You can only guarantee anonymity by not collecting any personally identifying information—for example, names, phone numbers, email addresses, IP addresses, physical characteristics, photos, and videos.

In many cases, it may be impossible to truly anonymize data collection . For example, data collected in person or by phone cannot be considered fully anonymous because some personal identifiers (demographic information or phone numbers) are impossible to hide.

You’ll also need to collect some identifying information if you give your participants the option to withdraw their data at a later stage.

Data pseudonymization is an alternative method where you replace identifying information about participants with pseudonymous, or fake, identifiers. The data can still be linked to participants but it’s harder to do so because you separate personal information from the study data.

Confidentiality means that you know who the participants are, but you remove all identifying information from your report.

All participants have a right to privacy, so you should protect their personal data for as long as you store or use it. Even when you can’t collect data anonymously, you should secure confidentiality whenever you can.

Some research designs aren’t conducive to confidentiality, but it’s important to make all attempts and inform participants of the risks involved.

As a researcher, you have to consider all possible sources of harm to participants. Harm can come in many different forms.

  • Psychological harm: Sensitive questions or tasks may trigger negative emotions such as shame or anxiety.
  • Social harm: Participation can involve social risks, public embarrassment, or stigma.
  • Physical harm: Pain or injury can result from the study procedures.
  • Legal harm: Reporting sensitive data could lead to legal risks or a breach of privacy.

It’s best to consider every possible source of harm in your study as well as concrete ways to mitigate them. Involve your supervisor to discuss steps for harm reduction.

Make sure to disclose all possible risks of harm to participants before the study to get informed consent. If there is a risk of harm, prepare to provide participants with resources or counseling or medical services if needed.

Some of these questions may bring up negative emotions, so you inform participants about the sensitive nature of the survey and assure them that their responses will be confidential.

The way you communicate your research results can sometimes involve ethical issues. Good science communication is honest, reliable, and credible. It’s best to make your results as transparent as possible.

Take steps to actively avoid plagiarism and research misconduct wherever possible.

Plagiarism means submitting others’ works as your own. Although it can be unintentional, copying someone else’s work without proper credit amounts to stealing. It’s an ethical problem in research communication because you may benefit by harming other researchers.

Self-plagiarism is when you republish or re-submit parts of your own papers or reports without properly citing your original work.

This is problematic because you may benefit from presenting your ideas as new and original even though they’ve already been published elsewhere in the past. You may also be infringing on your previous publisher’s copyright, violating an ethical code, or wasting time and resources by doing so.

In extreme cases of self-plagiarism, entire datasets or papers are sometimes duplicated. These are major ethical violations because they can skew research findings if taken as original data.

You notice that two published studies have similar characteristics even though they are from different years. Their sample sizes, locations, treatments, and results are highly similar, and the studies share one author in common.

Research misconduct

Research misconduct means making up or falsifying data, manipulating data analyses, or misrepresenting results in research reports. It’s a form of academic fraud.

These actions are committed intentionally and can have serious consequences; research misconduct is not a simple mistake or a point of disagreement about data analyses.

Research misconduct is a serious ethical issue because it can undermine academic integrity and institutional credibility. It leads to a waste of funding and resources that could have been used for alternative research.

Later investigations revealed that they fabricated and manipulated their data to show a nonexistent link between vaccines and autism. Wakefield also neglected to disclose important conflicts of interest, and his medical license was taken away.

This fraudulent work sparked vaccine hesitancy among parents and caregivers. The rate of MMR vaccinations in children fell sharply, and measles outbreaks became more common due to a lack of herd immunity.

Research scandals with ethical failures are littered throughout history, but some took place not that long ago.

Some scientists in positions of power have historically mistreated or even abused research participants to investigate research problems at any cost. These participants were prisoners, under their care, or otherwise trusted them to treat them with dignity.

To demonstrate the importance of research ethics, we’ll briefly review two research studies that violated human rights in modern history.

These experiments were inhumane and resulted in trauma, permanent disabilities, or death in many cases.

After some Nazi doctors were put on trial for their crimes, the Nuremberg Code of research ethics for human experimentation was developed in 1947 to establish a new standard for human experimentation in medical research.

In reality, the actual goal was to study the effects of the disease when left untreated, and the researchers never informed participants about their diagnoses or the research aims.

Although participants experienced severe health problems, including blindness and other complications, the researchers only pretended to provide medical care.

When treatment became possible in 1943, 11 years after the study began, none of the participants were offered it, despite their health conditions and high risk of death.

Ethical failures like these resulted in severe harm to participants, wasted resources, and lower trust in science and scientists. This is why all research institutions have strict ethical guidelines for performing research.

If you want to know more about statistics , methodology , or research bias , make sure to check out some of our other articles with explanations and examples.

  • Normal distribution
  • Measures of central tendency
  • Chi square tests
  • Confidence interval
  • Quartiles & Quantiles
  • Cluster sampling
  • Stratified sampling
  • Thematic analysis
  • Cohort study
  • Peer review
  • Ethnography

Research bias

  • Implicit bias
  • Cognitive bias
  • Conformity bias
  • Hawthorne effect
  • Availability heuristic
  • Attrition bias
  • Social desirability bias

Ethical considerations in research are a set of principles that guide your research designs and practices. These principles include voluntary participation, informed consent, anonymity, confidentiality, potential for harm, and results communication.

Scientists and researchers must always adhere to a certain code of conduct when collecting data from others .

These considerations protect the rights of research participants, enhance research validity , and maintain scientific integrity.

Research ethics matter for scientific integrity, human rights and dignity, and collaboration between science and society. These principles make sure that participation in studies is voluntary, informed, and safe.

Anonymity means you don’t know who the participants are, while confidentiality means you know who they are but remove identifying information from your research report. Both are important ethical considerations .

You can only guarantee anonymity by not collecting any personally identifying information—for example, names, phone numbers, email addresses, IP addresses, physical characteristics, photos, or videos.

You can keep data confidential by using aggregate information in your research report, so that you only refer to groups of participants rather than individuals.

These actions are committed intentionally and can have serious consequences; research misconduct is not a simple mistake or a point of disagreement but a serious ethical failure.

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Ethical Orientation and Research Misconduct Among Business Researchers Under the Condition of Autonomy and Competition

Matthias fink.

1 IFI Institute for Innovation Management, Johannes Kepler University Linz, Altenbergerstrasse 69, 4040 Linz, Austria

2 Strategy, Collective Action and Technology Group, Grenoble Ecole de Management, 12, rue Pierre Sémard, 38000 Grenoble, France

Johannes Gartner

3 School of Economics and Management (SKJCE), Lund University, Box 117, 221 00 Lund, Sweden

Rainer Harms

4 Faculty of Behavioural, Management and Social Sciences, University of Twente, Ravelijn 2109, P.O. Box 217, 7500 AE Enschede, The Netherlands

5 Higher School of Economics, Laboratory for Economics of Innovation, Institute for Statistical Studies and Economics of Knowledge, HSE University, Myasnitskaya Ulitsa, 20, Moscow, Russian Federation 101000

Isabella Hatak

6 Swiss Institute of Small Business & Entrepreneurship (KMU-HSG), University of St. Gallen, Dufourstrasse 40a, 9000 St. Gallen, Switzerland

The topics of ethical conduct and governance in academic research in the business field have attracted scientific and public attention. The concern is that research misconduct in organizations such as business schools and universities might result in practitioners, policymakers, and researchers grounding their decisions on biased research results. This study addresses ethical research misconduct by investigating whether the ethical orientation of business researchers is related to the likelihood of research misconduct, such as selective reporting of research findings. We distinguish between deontological and consequentialist ethical orientations and the competition between researchers and investigate the moderating role of their perceived autonomy. Based on global data collected from 1031 business scholars, we find that researchers with a strong deontological ethical orientation are less prone to misconduct. This effect is robust against different levels of perceived autonomy and competition. In contrast, researchers having a consequentialist ethical orientation is positively associated with misconduct in business research. High levels of competition in the research environment reinforce this effect. Our results reveal a potentially toxic combination comprising researchers with a strong consequentialist orientation who are embedded in highly competitive research environments. Our research calls for the development of ethical orientations grounded on maxims rather than anticipated consequences among researchers. We conclude that measures for ethical governance in business schools should consider the ethical orientation that underlies researchers’ decision-making and the organizational and institutional environment in which business researchers are embedded.

Introduction

The threat of misconduct in the production of academic knowledge relevant to businesses (business research) has received increasing attention in recent years for reasons that include aggressive research funding and tenure situations, organizations striving to attain top academic standings, mounting public scorn with regard to impact, and researchers’ internal conflicts between personal and work values (Albrecht et al., 2011 ; Cabral-Cardoso, 2004 ; Dalen & Klamer, 2005 ; Fanelli et al., 2019 ; Hall & Martin, 2019 ; Martin, 2016 ; Moffatt, 2011 ; van Yperen et al., 2011 ). While blatant misconduct seems to be relatively rare, milder forms of misconduct in research—sometimes ascribed the euphemism inappropriate conduct —are relatively common. One study reports that every third junior researcher in engineering admits to selectively reporting results in research reports (Behrens & Gray, 2001 ). In this study, we focus on this milder form of research misconduct because, despite the relevance, ongoing concerns, and the publication of a few typologies categorizing business research misconduct and offering prescriptions for dealing with it, little empirical investigation has been undertaken. That lack of empirical research may result from the delicate nature of the topic, and respondents may be reluctant to have their ethics directly observed (Trevino, 1986 ). Experiments that manipulate research misconduct in real-life settings are difficult to justify.

Given data collection challenges in this delicate research area, empirical studies on research misconduct struggle to account for context fully. This is problematic as we need to understand how individuals interact with their organizational context to minimize misconduct in business research (Hall & Martin, 2019 ), which can be defined as the breach of maxims, standards, and rules of conduct (Taylor, 1975 ). Such understanding is central to the development of practical measures that ensure that research continues to contribute to the vital goal of science: Knowledge generation for the benefit of society (Mooken & Sugden, 2014 ; Stilgoe et al., 2013 ). Research misconduct, such as selective reporting, threatens the integrity of the scientific community (Cabral-Cardoso, 2004 ; Gilbert & Denison, 2003 ; Martinson et al., 2005 ) and can trap science in the tragedy of the commons , that is, that the pursuit of personal benefits that worsens the situation for all (Martin, 2012 ). In the worst case, practitioners, policymakers, and fellow researchers base their actions on research results biased as a result of misconduct (Boseley & Davey, 2020 ).

The research environment is characterized by rising levels of competition for publication opportunities, funds, and career opportunities (Fang & Casadevall, 2011 ; Hall & Martin, 2019 ). To redress “the dark side of the hypercompetitive environment of contemporary science” (Fang & Casadevall, 2011 , p. 1012), the research community (Martin, 2013 ), the general public, and policymakers have called for research governance (Pandza & Ellwood, 2013 ). These calls led to the implementation of new external rules. Examples of external rules are codes of conduct such as the Code of Ethics of the Academy of Management (AoM) in 2006, ethical assessment procedures, and the formation of bodies that oversee adherence to those rules (Martin, 2013 ). However, as several recent misconduct cases uncovered only ex-post demonstrate, misconduct in business research cannot be eradicated even by applying the most rigorous rules and regulations (e.g., the Lancet’s retraction of a Covid study, Boseley & Davey, 2020 ).

Consequently, individual researchers’ ethical orientations, that is, the core logics that underpin their ethical reasoning (Reidenbach & Robin, 1990 ; Tanner et al., 2007 ), have become increasingly relevant in the discourse on how to promote ethical research. Consequently, universities have promoted ethical communities that inculcate moral socialization and mutual respect between faculty members by fostering an active discussion on ethical issues and acting on them (McCabe et al., 2001 ; Titus et al., 2008 ; Treviño & McCabe, 1994 ). While such initiatives can reinforce the ethical orientation among faculty, we still do not know whether ethical orientation can effectively reduce the threat of misconduct in research in general and particularly in business research, let alone which forms of orientation might do so. Following Eisenhardt et al. ( 2016 ) and Hall and Martin ( 2019 ), we focus on business research because it is a research area characterized by a pressure to secure publications in highly ranked journals and the significant rewards available to successful researchers (Hall & Martin, 2019 ). At the same time, published business research flows through to business practice. The last financial crisis made apparent the practical relevance of ensuring complete, unbiased, and independent business research.

Generally, ethical research is influenced by either a consequentialist ethical orientation that implies the evaluation of behavior in the face of its consequences or a deontological ethical orientation that implies the evaluation of behaviors drawing on the individual’s duties, rights, and obligations represented by maxims (Reidenbach & Robin, 1990 ; Tanner et al., 2007 ). At any point in the research process, researchers are, to some extent rooting their decisions in a consequentialist orientation and also in a deontological orientation, meaning every researcher is host to both ethical orientations. We argue that both types of ethical orientation, depending on their strength, restrain researcher misconduct in business research either through the threat of sanction or by potentially inculcating remorse, and that the effect is contingent upon the research context in terms of perceived autonomy and competition.

We apply ordinal logit regression to a global dataset collected from 1031 business scholars to empirically test two overarching research questions: Are business researchers with a particularly strong deontological or consequentialist ethical orientation less prone to research misconduct? Moreover, is the relationship between ethical orientation and research misconduct contingent on the competition and autonomy perceived by business researchers?

We find that researchers with a strong deontological ethical orientation are less prone to misconduct in business research. This effect is robust against different levels of perceived autonomy and competition. In contrast to our expectations, researchers’ consequentialist ethical orientation, in turn, is positively associated with misconduct in business research. Rising levels of competition in the researchers’ workplace reinforce this effect.

Our findings contribute to research and practice in several ways. First, we provide theoretically grounded arguments and empirical evidence on the relationship between the researchers’ ethical orientations and their research misconduct. By specifying the differences between deontological and consequentialist ethical orientations regarding research misconduct, we substantiate discussions about heterogeneity among researchers. Our results call for the development of ethical orientations founded on maxims rather than anticipated consequences among the research community. Second, by contextualizing our research by accounting for researchers’ perceptions of competition and autonomy—two core dimensions of the academic workplace—the findings signal the context-sensitivity of misconduct in business research. For those in practice, our findings highlight the potentially toxic combination of consequentialist researchers and the extent of their embeddedness in intensely competitive research environments. Knowing the empirical relevance of this potentially toxic combination raises questions about the personnel development policies frequently applied in business schools, such as having a group of junior researchers compete for one senior position. Our study highlights measures for ethical governance in business research that consider the ethical orientations that underlie researchers’ ethical decision-making and the organizational and institutional environment in which business researchers see themselves to be embedded.

Conceptual Background and Hypotheses Development

Deontological versus consequentialist ethical orientations and research misconduct.

Given the significant potential impact, researchers must refrain from research misconduct (Kornfeld, 2012 ; Lund, 2000 ). Because rules and regulations have failed to curb research misconduct effectively, researchers’ ethical orientation has become important in the debate on ethical research (Boden et al., 2009 ). We differentiate between the deontological and consequentialist ethical orientations, which are rooted in two distinct foundations of ethical reasoning (Reidenbach & Robin, 1990 ; Tanner et al., 2007 ).

The deontological ethical orientation in the tradition of Kant ( 2003 , p. 1788) builds on autonomous moral reasoning that is guided by the fit of a specific action with a person’s maxims (McNair, 2000 ). When a deontological ethical orientation is the foundation of moral reasoning, motivations for action are based on reason alone (O’Neill, 1989 ). Accordingly, a deontological ethical orientation is free from external constraints and is thus autonomous (Galvin, 1999 ). Accordingly, the categorical imperative (Kant, 2003 , p. 1788) determines what a researcher ought to do. The categorical imperative uses a thought experiment to assess the moral quality of the principles (maxims) that individuals follow when determining their intentions: If those maxims are ones that the individual might want to become a generally valid law, the intention derived from the categorical imperative is, therefore, “good” (Schneewind, 1992 ). In the aforementioned thought experiment, the individual may consider the needs of the whole community by claiming a fictitious general validity and by including other people’s ends in his or her deliberations (Paton, 1962 ). It is not the apparent alignment between the motivation and the rules that is important, but the good intention (Korsgaard, 2002 ; Tyler & Blader, 2005 ). To clarify, most researchers commit themselves to the maxim of not reporting only selected results, even when to do so would be beneficial to them; they would refrain from suppressing results because they do not want such conduct to become generally accepted practice. Actions that diverge from maxims cause unpleasant remorse (Shalvi et al., 2011 ) and, therefore, a deontological ethical orientation reduces research misconduct.

Researchers’ deontological ethical orientation is negatively related to research misconduct.

In practice, ethical considerations cannot be fully disentangled from the web of constraints (Schütz & Luckmann, 1973 ) in which researchers are embedded as members of the research community. Researchers with a consequentialist ethical orientation build their moral reasoning on the anticipated consequences of their actions, which are, in turn, determined by a web of constraints. Accordingly, their motivations are externally determined (see, the hypothetical imperative, Kant, 2003 , p. 1788), for example, by legal regulations and codes of conduct that define what researchers ought to do (Luhmann, 1977 ) and which consequences they face if misconduct is proven. The defined consequences take effect within a community when the members accept the rule (Korsgaard, 1996 ) and control and sanction the misconduct of their peers (Eberl, 2004 ; Shalvi et al., 2011 ). For example, a generally accepted rule for empirical research within the research community would be that all study results should be reported, not a selection of them. Peers enforce this rule through control measures such as the peer-review process. Those researchers who break the rule face consequences, that can include the retraction of publications, the loss of their reputation, and their academic position. The anticipated negative consequences of breaches of the generally accepted rules of the game prevent researchers from acting in a manner that is contrary to the standards of the scientific community (Akaah, 1993 ). Accordingly, a consequentialist ethical orientation reduces research misconduct.

Researchers’ consequentialist ethical orientation is negatively related to research misconduct.

Research Misconduct Among Deontologists in the Context of Autonomy and Competition

We argue that the relationship between researchers’ deontological ethical orientation and research misconduct is contingent on perceived autonomy. Researchers have considerable autonomy when conducting their research. However, different researchers are likely to perceive the degree of autonomy in their environment differently, leading to a variation in their behavioral responses to it.

The level of autonomy researchers perceive determines how strongly their deontological ethical orientations affect the likelihood of research misconduct. High levels of perceived autonomy permit researchers to decide what, how, when, and with whom they want to work (Rose, 2001 ; Sax et al., 2002 ), thus providing them with academic freedom (Bland et al., 2005 ). Zhang et al., ( 2017 , p. 236) state that autonomy makes researchers “feel self-determined and free from external controls or constraints” (on workplace autonomy, see also, Deci et al., 1989 ; Fricker & Schonlau, 2002 ; Spreitzer, 1995 ). Maxims induce researchers with strong deontological postures to justify their behavior to themselves rather than to others (Douglas, 2003 ). The more strongly researchers feel themselves to be autonomous, the more they can draw on their internal ethical standards as they make decisions (McNair, 2000 ; White, 2009 ). Accordingly, if researchers, who root their ethical research in a deontological ethical orientation, perceive themselves to be highly autonomous, maxims will limit their research misconduct even more than their peers with less perceived autonomy in the workplace. We, therefore, formulate the following hypotheses:

The perceived level of autonomy moderates the relationship between researchers’ deontological ethical orientation and research misconduct, such that the negative relationship is stronger under high levels of perceived autonomy in the workplace.

While the perception of autonomy in the workplace reinforces the independence of researchers’ moral reasoning from influence by external forces (Debackere et al., 1995 ) and, thus, extends their freedom to follow their maxims, perceived competition affects the consequences of research misconduct. However, deontological moral reasoning builds on maxims rather than on the consequences of actions. The ethical value of the research maxims on which researchers with a deontological ethical orientation base their ethical reasoning is assessed independently from the causal constraints they face in the context they are embedded in (Kant, 2003 ). Accordingly, the impact of researchers’ deontological ethical orientation on research misconduct should not be contingent on the level of competition in the workplace. Therefore, we have not attempted to formulate a corresponding hypothesis.

Research Misconduct of Consequentialists in the Context of Competition and Autonomy

The research environment is characterized by intense competition around publication opportunities, funding, and career opportunities (Fang & Casadevall, 2011 ; Hall & Martin, 2019 ). However, the perception of the degree of competition in the workplace is subjective, and different perceptions lead to variations in the behavioral response to the perceived competition. We argue that for researchers who base their moral reasoning on the anticipated consequences of their actions, perceived competition will influence how effectively their consequentialist ethical orientation deters research misconduct. This is because the behavior of researchers is influenced by their peers (Salancik & Pfeffer, 1978 ), who define expectations as the standard of peer-group comparisons (Brown et al., 1998 ) as well as sanctions and rewards for individual achievements (Williamson & Cable, 2003 ).

In intensely competitive work environments, researchers abstain from research misconduct because they anticipate that their peers are more likely to identify and report a cheating colleague, and, thus, cheats are less likely to prosper from cheating (Fink et al., 2012 ). While we see the merit in this whistle-blower argument, we argue that it downplays a more immediate effect of competition on the link between researchers’ consequentialist ethical orientation and research misconduct. The presence of intense competition in the first place implies that any gains obtained by cheating would be of greater relevance than in a less intense competitive environment (Shi et al., 2016 ). Such gains might include an extra publication, a publication in a more prestigious outlet, or extra funding from sponsors or funding agencies. Accordingly, high levels of competition reinforce the positive consequences of research misconduct anticipated by consequentialist researchers. Even if their peers monitor and report them more strictly in intensely competitive settings, the immediate competitive advantage of gains from research misconduct should outweigh the threat of negative consequences. We argue that a certain immediate gain from research misconduct is a stronger motivational factor than possible detriment owing to sanctions in the longer term (Åkerlund et al., 2016 ). Hence, intense competition should weaken the limiting effect of a consequentialist ethical orientation. These arguments lead us to propose:

The perceived level of competition moderates the relationship between researchers’ consequentialist ethical orientation and research misconduct, such that the negative relationship is weaker under high levels of perceived competition.

Moreover, we assume that the extent to which anticipated consequences restrict research misconduct is not only contingent on the level of competition but also on the level of autonomy researchers perceive they have. This is because researchers who perceive they have a great deal of autonomy view their peers as having relatively little power to determine any negative consequences of their research misconduct; essentially, the chance of being sanctioned for ethical misconduct becomes less likely the greater autonomy a researcher accrues (Debackere et al., 1995 ). At the same time, high levels of autonomy do not reduce the positive reputational and career effects consequentialist researchers derive from the extra publications or extra funding resulting from their undetected and unsanctioned ethical misconduct. Hence, in researchers’ consequentialist ethical reasoning, ethical misconduct becomes less threatening with increasing autonomy, while the positive consequences remain intact. Because as part of their consequentialist orientation, researchers base their moral reasoning on the anticipated consequences of their action, increasing autonomy should, thus, weaken the limiting effect of their consequentialist ethical orientation on research misconduct. We therefore postulate:

The perceived level of autonomy moderates the relationship between researchers’ consequentialist ethical orientation and research misconduct, such that the negative relationship is weaker under high levels of perceived autonomy. The five hypotheses are summarized in the theoretical model depicted in Fig. ​ Fig.1. 1 .

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Object name is 10551_2022_5043_Fig1_HTML.jpg

Research model and hypotheses

Materials and Methods

Data collection.

The sample informing this research is drawn from the worldwide population of management scholars, from doctoral students to full professors. We used contact details submitted to an e-mail contact list of active participants of the 2016 annual meeting of the AoM, the preeminent professional association for management scholars boasting a community of 20,000 scholars from 120 countries (AoM, 2021 ). Sampling among participants at an international science conference offers the opportunity to address a globally distributed population of a specific profession that has a specific research focus. That sampling approach has been successfully employed in empirical research, especially in the areas of health and medicine (Pezold et al., 2016 ; Zozus et al., 2017 ). Rigorous peer-review processes affecting all contributions to the AoM conference ensured that those involved were active research scholars who authored research presented at the conference. The individuals approached could thus be guaranteed to fall into our target group.

After a notification, we sent 10,716 e-mail invitations to all authors of papers presented at the 2016 AoM annual meeting, followed by two rounds of reminders seven and 14 days after the initial mailing. A web link pointed to a landing page where the participants could choose between a classic online survey or an interactive gamified survey. The gamified survey aimed to stir curiosity and thus enhance the response rate. The gamified survey was also offered an opportunity to check for social desirability bias (Georgiou et al., 2019 ; Stodel, 2015 ). Both survey versions contained the same formulations, sequence, and scales. Of the 2533 recipients who clicked the invitation link, 1684 completed the survey. We removed responses with missing values on the dependent variable and obtained a sample of 1031 individual responses to analyze. This response represents an effective response rate of 9.6%, which is slightly below the average of similar online survey studies (Pedersen & Nielsen, 2016 ; Petrovčič et al., 2016 ; Wouters et al., 2014). However, survey response rates have been decreasing significantly since 1986 (Sheehan, 2001 ) and are generally lower for web-based survey instruments (Blumenberg & Barros, 2018 ); Manfreda et al. ( 2008 ), for example, found an average response rate of 11% and a 6–15% confidence interval for online surveys. Lower response rates were recorded by studies that either randomly addressed members of professional associations (Poynton et al., 2019 ), used detailed questionnaires (Sauermann & Roach, 2013 ), or conducted studies on sensitive topics (Trautner et al., 2020 ).

We addressed potential nonresponse bias at the survey design stage by carefully designing the questionnaire to maintain the respondent’s interest, keeping it to a reasonable length, and establishing the importance of the study in the introductory e-mail (Yu & Cooper, 1983 ). We also assessed the analytic sample for potential nonresponse bias using two techniques to target specific types of nonresponse (Rogelberg & Stanton, 2007 ). First, we implemented the archival approach that compares the characteristics of the sample with those of the population. This approach is especially suited for identifying passive nonresponse, which results from external factors that keep recipients from returning the questionnaire on time. Passive nonresponse typically accounts for 85% of total nonresponse (Sosdian & Sharp, 1980 ). For our sample, we used the respondents’ age for archival analysis, as this variable has been shown to be relevant to research misconduct (Kelley et al., 1990 ) and was available for the members of the AoM. The comparison identified only a minor under-sampling of older researchers. Accordingly, passive nonresponse does not seem to be a significant concern. Second, we applied wave analysis, which involves comparing the results from early and late respondents, which is especially useful for controlling active nonresponse, which refers to conscious decisions not to participate in a study (Rogelberg et al., 2003 ). For our sample, the wave analysis did not identify any significant differences between early (first half) and late (second half) respondents, and hence we conclude that active nonresponse bias is also unlikely to be an issue in our sample.

Another potential threat to the validity of self-reported data in surveys on sensitive topics such as ethics is social desirability bias (Chung & Monroe, 2003 ; Cohen & Pant, 1998 ; Krumpal, 2013 ; Randall & Gibson, 1990 ). Social desirability bias emerges when respondents questioned about their compliance with widely accepted behavioral norms over-report behavior that is in line with those norms and under-report deviations from them (Podsakoff et al., 2013 ). Because the effectiveness of social desirability scales or single items in directly measuring and correcting such bias is heavily debated, and such strategies may even introduce a systematic error (Fisher, 1993 ; Kam, 2013 ; Larson, 2019 ; Paulhus, 2002 ), we decided to implement a mix of measures in the design of the data collection that has been found to mitigate the threat of social desirability bias. Notifying all meeting participants that they would be invited to participate in a survey (DeLeeuw, 2018 ), the anonymity guaranteed to all respondents, and the avoidance of personal contact by opting for a self-administered web-based survey (Hunter, 2012 ; Moy & Murphy, 2016 ; Richman et al., 1999 ; Tourangeau & Yan, 2007 ) should have mitigated social desirability bias (Couper, 2017 ). Additionally, for those respondents who opted for the gamified version of the survey, the perception of the power relation between researcher and respondent (Denzin, 1989 ) and the feeling of being evaluated (Armstrong et al., 2016 ) should have been further ameliorated because playing a game creates a cognitive load that reduces respondents’ concern over social desirability. Accordingly, gamified surveys are less prone to faking and distortion (Georgiou et al., 2019 ; Stodel, 2015 ). Comparing the values of the dependent and independent variables collected via the traditional survey to those collected via the gamified survey revealed no significant differences. Because any social desirability bias would be stronger in the subsample collected via the traditional web survey than in the subsample collected via gamified survey, the lack of significant differences is an indication that social desirability bias is not an issue in our sample.

Dependent and Independent Variables

To capture the dependent and independent variables, we used the vignette technique (Finch, 1987 ; Hyman & Steiner, 1996 ) that is well-established in business ethics research (Hox et al., 1991 ). For research on ethical orientations and ethical behavior, the vignette technique offers several advantages over direct-question-based measures, including greater realism better approximates real-life decision-making (Barnett et al., 1994 ; Cavanagh & Fritzsche, 1985 ; Robertson, 1993 ), enhanced internal validity, measurement reliability, and ease of replication through standardized stimuli provided to all respondents (Lysonski & Gaidis, 1991 ; Weber, 1992 ), enhanced construct validity through a more rigid focus on specific aspects of the phenomenon under research (Cavanagh & Fritzsche, 1985 ; Weber, 1992 ) and the possibility to differentiate between ethical principles and behavior (Cavanagh & Fritzsche, 1985 ).

Following the constant-variable-value vignette method (Cavanagh & Fritzsche, 1985 ), all respondents received the same description (vignette) of an ethical dilemma in a research situation (Table ​ (Table1): 1 ): A client asks the researcher to suppress undesirable results in a study conducted for the client (Loo, 2002 ). The practical relevance of this setting is highlighted by Behrens and Gray ( 2001 ), who reports that 35% of researchers allow their industry partners to delete content in research reports, a practice that can be deemed unethical. The respondents had to decide whether to suppress results. The scale was anchored with “not likely at all [suppress]” (1) and “very likely [suppress]” (6). The frequencies per category were: 1 (not likely at all): 357 (34.6%); 2: 337 (32.7%); 3: 162 (15.7%); 4: 101 (9.8%); 5: 56 (5.4%), 6 (very likely): 18 (1.8%).

Descriptive statistics and operationalization

1031 observations

SD   standard deviation

Due to low frequencies in the top three categories, we combined those categories into one that denotes a high likelihood of agreeing to suppress the unfavorable results. Accordingly, the dependent variable that we call research misconduct consists of four ordered categories.

Following Tanner et al. ( 2007 ), we asked the respondents to evaluate the relevance of consequentialist and deontological ethical orientations for the decision they just made, which form our independent variables . Ethical orientations are rather stable and guide decisions across different life spheres (Reidenbach & Robin, 1990 ). Using the vignette technique, we assume that the moral foundations that the respondents report in the hypothetical decision-making scenario are ones that also guide them in other similar research-based decisions (Barnett et al., 1994 ; Cavanagh & Fritzsche, 1985 ). We used three items each to capture the reasons reflecting consequentialist and deontological ethical orientations (Table ​ (Table1) 1 ) adapted from Reidenbach and Robin ( 1990 ) and Loo ( 2002 . An example of an item measuring a consequentialist ethical orientation is “I chose this option because the outcomes produce the best net value.” In contrast, an example of a deontological ethical orientation is “I chose this option because some behaviors are definitely right or wrong, irrespective of the consequences.” All items were coded so that higher numbers indicate a higher score on the construct.

Moderating Variables

The first moderator, autonomy , describes the degree to which researchers feel that they are free to make their own decisions regarding their research. The second moderator, competition , describes the degree to which researchers feel exposed to fighting with their peers over career opportunities and funds. We measured autonomy with a seven-item scale adapted from Morgeson and Humphrey’s ( 2006 ) work design questionnaire and competition with a five-item scale (Table ​ (Table1) 1 ) adapted from Fink et al. ( 2012 ). For each item, respondents indicated their degree of perceived autonomy/competition on a 6-point rating scale where high values denote high levels of autonomy/competition.

Control Variables

First, we controlled for the respondents’ research productivity using two variables: the number of publications and the amount of research funding obtained in the past three years. Although measuring researchers’ productivity remains a thorny issue (van Noorden, 2010 ; Wootton, 2013 ), there is consensus that publications and the amount of research funding are key output measures (Garcia & Sanz-Menéndez, 2005 ; Gulbrandsen & Smeby, 2005 ; Linton et al., 2012 ). We measured the number of publications with an open question and the funding obtained on an ordinal scale (Table ​ (Table1). 1 ). Given the skewness of the publication measure, we used its natural logarithm in the regression analysis. Next, we controlled for the respondent’s biological sex because women have been reported to be more sensitive to ethical issues than men (Glover et al., 2002 ; Kelley et al., 1990 ; O’Fallon & Butterfield, 2005 ).

Moreover, we included the respondent’s academic career stage as a further control because the career stage may influence perceived competitive pressure (see, e.g., Hatak et al., 2015 on socio-emotional selectivity theory) and perceived autonomy (Dowd & Kaplan, 2005 ). The academic career stage can also influence a researcher’s inclination to ethical misconduct (Fanelli et al., 2015 ). Because the individual’s age correlates strongly with their position on the academic career ladder, we omitted age from the control variables. Additionally, we controlled for whether the respondent works in a private university or research institute (versus a public one) and whether they have been promoted in the last three years. Private and public universities differ in the level of competition and autonomy (Estermann et al., 2011 ; Ivory & Shipton, 2020 ). A recent promotion reduces the competitive pressure and limits the immediate positive consequences of ethical misconduct for the career. Finally, we controlled for the type of survey the respondent opted for (conventional or gamified) because different online data collection methods may affect the responses (Keusch & Zhang, 2017 ).

Discriminant Validity

Before computing index scores of the multi-item scales for the subsequent regression analysis, we examined their discriminant validity using confirmatory factor analysis. Specifically, we compared a specification where all items load on their theoretically intended factors to ones where two sets of items load on a single factor, while the other two load on their own factors, and a specification where all items load on a single factor. In each case, the theoretically intended model resulted in a superior fit with the data. Indeed, the model where all items load on their intended factors shows a good fit with the data (Hu & Bentler, 1999 ): the comparative fit index (CFI) score is 0.976 (recommended minimum 0.95), the standardized root mean squared residual (SRMR) index value is 0.035 (recommended maximum 0.08). The root mean squared error of approximation (RMSEA) is 0.040 (recommended maximum 0.06). Furthermore, the model’s average variance extracted (AVE) scores exceed the squared correlations among the latent variables, which provides further evidence for satisfactory discriminant validity (Fornell & Larcker, 1981 ).

Common Method Bias

Scholars have highlighted the threat of common method bias (CMB) to empirical research relying on cross-sectional data (Lindell & Whitney, 2001 ), and especially to the most common self-report surveys with cognitions as dependent and independent variables (Harrison et al., 1996 ). Several ex-ante and ex-post measures can be applied to address the risk of CMB (Podsakoff et al., 2003 ). However, Spector ( 2006 ) and Richardson et al. ( 2009 ) have provided substantial evidence showing that ex-post statistical measures to adjust analyses for CMB are unreliable and often misleading. Accordingly, we employed the recommended strategies to avoid CMB ex-ante. First, we protected the respondents’ anonymity to mitigate evaluation apprehension (Podsakoff et al., 2003 ). Second, we used different question formats and randomized the order of scales in the questionnaire.

Finally, we checked the data for potential bias due to this study's survey strategy. A comparison on the descriptive level of the data collected with the gamified and traditional surveys shows that while the gamified survey attracted a slightly younger set of respondents and one with slightly more women, only the level of autonomy is significantly higher in the sample drawn from the traditional survey. The response rate did not differ between the two types of the survey instrument. Accordingly, bias stemming from the survey strategy does not appear to affect our study.

Analysis Strategy and Diagnostics

The ordinal nature of the dependent variable prompted us to choose ordinal logit regression as the most appropriate statistical modeling technique. We compared the Akaike and Bayesian information criteria between an ordinal and a linear regression model. The criteria favored the ordinal specification. We examined the models for multicollinearity, influential observations, and the parallel regression assumption that underlies ordinal regression models before performing the final estimations.

The mean variance inflation factor (VIF) score was 1.40, and the highest VIF, which pertained to the category Ph.D. student in the academic career stage variable, was 3.01. These are below the conventional threshold of 10 for multicollinearity.

We analyzed potentially influential observations by computing residuals, leverages, and Cook’s distance statistics, as well as examining plots of squared residuals and leverages. We identified 14 observations that had potentially influenced the model estimates and excluded them from the final analysis sample, which thus became 1031 observations.

The parallel regression assumption that underlies ordinal regression models maintains that the relationship between each pair of outcome groups is the same; that is, a single set of coefficients applies to all outcome groups. If the model violates this assumption, a generalized model where one or more coefficients vary between different outcome groups must be estimated. To test this assumption, we first compared a model specification where the parallel-lines constraint is imposed on all variables with a model where the constraint is relaxed for all variables. We found that the parallel regression assumption did not hold for our model. We then followed an iterative process of relaxing the parallel-lines constraint for one variable at a time (Williams, 2006 ) to determine which variables violate the assumption. These tests revealed that the coefficients of both independent variables and two control variables (promoted in the last three years and the assistant professor category in the academic career stage) need to be estimated separately for each pair of outcomes. Therefore, the final regression models use a generalized ordinal logit specification where we apply the parallel regression constraint to all variables except for the four mentioned above.

Descriptive Statistics

Table ​ Table1 1 shows the means, standard deviations, minima, and maxima for all variables used in the analysis. Table ​ Table2 2 displays the correlation matrix. The dependent variable and two control variables (research funding and current position) are ordinal rather than continuous, so we report Spearman’s rank-order correlations. We do not detect any unexpected correlations (Fig.  1 ).

Correlations

1031 observations. Spearman rank-order correlation coefficients

Table ​ Table3 3 presents the results of the generalized ordinal logit regression models. Model 1 presents the unconditional effects of all variables (Hypotheses 1 and 2), whereas Model 2 adds the interaction terms (Hypotheses 3–5). Note that Table ​ Table3 3 displays a single coefficient across all three thresholds for variables for which the parallel regression assumption holds, and the corresponding restriction is applied. The thresholds are dichotomizations of the ordinal variable into binary outcomes, such as those analyzed in logistic regressions. For example, at the third threshold, we compare the first three categories of the dependent variable categories against category 4. A different coefficient is displayed for each threshold for the four variables (and the interaction terms they are included in) that violate the parallel regression assumption. In addition to the logic coefficient, Table ​ Table3 3 displays the standard error, the p value, and the odds ratio as an effect size estimate.

Generalized ordinal logit regression results pertaining to research misconduct

SE standard error, OR odds ratio

Threshold-specific estimates are reported only for those variables that violate the proportional odds assumption. Threshold 1 contrasts category 1 of the dependent variable (absolutely would not suppress unwelcome research results) with the higher categories 2 (most likely would not suppress), 3 (perhaps would suppress), and 4 (most likely would suppress); Threshold 2 contrasts categories 1 and 2 with categories 3 and 4; and Threshold 3 contrasts categories 1, 2, and 3 with category 4

Model 1 shows that both types of ethical orientation are significantly related to the dependent variable. A deontological ethical orientation is negatively and significantly associated with research misconduct. This finding supports Hypothesis 1. In contrast, a consequentialist ethical orientation has a positive and significant association with research misconduct, that is, the likelihood of agreeing to suppress unwelcome research results. This finding does not support Hypothesis 2 suggesting a negative effect.

Interestingly, the association between consequentialist ethical orientation and research misconduct is particularly strong. The respondents show the highest likelihood of agreeing to suppress unfavorable results. The odds ratios for the highest threshold in the outcome variable are 2.33 for consequentialist and 0.23 for deontological ethical orientation. The odds ratios of positive and negative odds are difficult to compare because negative coefficients result in odds ratios of less than one. To make them comparable with positive odds ratios, they can be reversed (1/odds ratio). The reverse odds ratio for deontological ethical orientation is 4.35, which is greater than the odds ratio of consequentialist ethical orientation.

Model 2 adds the interaction terms to the equation. For reasons of parsimony, we include all interaction terms in a single model. We also tested the interactions separately and found the coefficients to be robust. Therefore, the only significant interaction in the model is the one between consequentialist ethical orientation and competition. The interaction term has a positive sign, which suggests that the positive effect of a consequentialist ethical orientation on high levels of research misconduct becomes stronger when the level of competition increases. This result is significant at a level of 0.05 for the third threshold, which is when we compare the first three categories of the dependent variable against the fourth category.

To illuminate the interaction effect, we computed the average marginal efffect (AME) of a consequentialist ethical orientation on the highest level of research misconduct with the moderator set one standard deviation unit below and above its mean (Ai & Norton, 2003 ; Aiken & West, 1991 ). We computed the AME on all levels, but—for simplicity’s sake—we display only the highest level on the ordinal scale of the dependent variable in this illustrate on. The y-axis depicts the average marginal effect (AME). Figure  2 shows that the effect of a consequentialist ethical orientation on the highest level of research misconduct is stronger (AME = 0.09, p  = 0.000) when the competition is one standard deviation unit above its mean than when the level of competition is one standard deviation unit below its mean (AME = 0.05, p  = 0.000). These findings support Hypothesis 4 but not Hypotheses 3 and 5.

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Average marginal effects of consequentialist ethical orientation on research misconduct at different levels of competition. Notes: The average marginal effect of consequentialist ethical orientation on fraudulent behavior is 0.05 ( p  < 0.001) when the competition level is 1 SD below its mean, whereas it is 0.09 ( p  < .001) when the competition is 1 SD above its mean

This study investigated whether business researchers who base their ethical reasoning on a consequentialist and deontological ethical orientation are effectively protected from the temptation of research misconduct and what role context plays. We expected both types of researchers’ ethical orientations to be associated with less research misconduct. We also expected the relationship between researchers’ ethical orientation and research misconduct to be contingent on perceived competition and autonomy. Our results indicate that a strong deontological ethical orientation restricts research misconduct, while a strong consequentialist ethical orientation fosters misconduct in the business research context. This finding may be explained by the logic researchers follow in their consequentialist reasoning: They balance the potential costs and benefits of their behavior. If the perceived benefits are high and the expected costs of detection are low, research misconduct is attractive for those who act upon the expected consequences of their behavior. This logic is in line with cost-benefits arguments developed in legal theories of misconduct, which argue that the propensity of individuals to engage in misconduct is a function of the likelihood of detection and punishment compared with the utility gained from the misconduct (Becker, 1968 ; Hornuf & Haas, 2014 ).

Our findings show that the level of competition in the workplace is a factor in research misconduct among consequentialist researchers. Note that this effect may be small but is significant, supporting the notion of time-discounting related to the benefits and costs of misconduct (Åkerlund et al., 2016 ). Time-discounting means that immediate benefits are more relevant in moral reasoning than subsequent sanctions. Moreover, these punishments might not ultimately be so severe, as empirical evidence on the subsequent careers of researchers found guilty of misconduct shows (Galbraith, 2017 ). In summary, researchers with a strong consequentialist ethical orientation working in highly competitive settings may constitute a potentially toxic configuration.

We contribute to theory as follows: A cost–benefit perspective in research on misconduct (Greve et al., 2010 ; Hall & Martin, 2019 ) can fall short in considering individual attributes that go beyond rational choice arguments. We do not dispute the existence of a rational posture toward ethical research, nor do we dispute that a consequentialist ethical orientation has a strong effect on negative outcomes. Instead, this research highlights the importance of considering heterogeneity in ethical orientations and researchers’ individual attributes. We build on and integrate research from philosophy, psychology, and sociology that has focused on unfolding individual attributes while accounting for social contexts to explain differences in behavior. Our research clearly illustrates the importance of explicitly including ethical orientation in theory in that it offers evidence of the effects deontological and consequentialist ethical orientations exert on research misconduct.

Interestingly, deontological orientations seem to reduce research misconduct far more than consequentialist orientations increase it. In line with self-regulation theory (Bandura, 1991 ), this suggests that self-regulation is more effective than sanctions in reducing misconduct in business research. For researchers to refrain from misconduct, self-inflicted remorse seems to be more relevant than the punishment imposed by others. A possible explanation might be that in deontological reasoning, remorse is inevitable, while consequentialist reasoning encourages the hope of escaping punishment because the research community might fail to detect and punish the misconduct. Researchers have adopted various perspectives on rules and regulations when investigating the forms of ethical (mis)conduct (Hall & Martin, 2019 ). Our study extends these efforts by suggesting that focusing on the variations in ethical orientations offers attractive avenues for explaining research misconduct.

Second, we contribute a contingency perspective on research misconduct. The episodic nature of research misconduct makes it likely that individual attributes are not its only stable antecedents. We find that perceived competition matters in the positive relationship between a consequentialist ethical orientation and research misconduct. Intense competition not only erodes the limiting effect of a consequentialist ethical orientation on researchers’ ethical misconduct but even turns it negative. Accordingly, under the condition of low to moderate levels of competition, stronger consequentialist ethical orientations still restrict researchers’ ethical misconduct. However, when competition in the workplace is fierce, that misconduct is more likely if the researchers’ moral reasoning is built on the consequences of their actions. This finding aligns with the general strain perspective (Agnew, 1992 ) that postulates that when individuals face stressful circumstances concerning the present or the future, they experience negative emotions (Rauch et al., 2018 ). To alleviate them, individuals engage in adaptive behaviors, including questionable behavior (Agnew, 1992 ). Not publishing a much-needed paper or attracting research funding because of excessive competition may constitute such a source of strain for consequentialists because they will be deprived of essential resources. General strain theory postulates that external conditions influence whether individuals respond to the strain with acceptable or questionable behavior, for example, through research misconduct (Lewellyn et al., 2017 ). We extend this stream of research (O’Boyle et al., 2017 ) by showing that for research misconduct, specific aspects of the work context (i.e., competition) are relevant for consequentialists rather than for deontological reasoning among researchers. This insight adds nuance to the general strain perspective.

The current research has implications for practical research governance. First, ethics training programs for researchers are widespread and are becoming more effective (Watts et al., 2017 ). While Watts et al. ( 2017 ) suggest that participant demographics influence the effectiveness of ethics training for the sciences (see Medeiros et al., 2017 for business ethics), we add that differences in ethical orientation may influence research misconduct too; for example, documentation of negative consequences of research misconduct may tip the consequentialists’ scale in favor of ethical research. In light of our findings, the display of ethical role models in research might become an essential aspect of ethics training programs in business schools and universities to reinforce deontological researchers’ maxims. However, consensus on the most effective forms of ethics education is just beginning to emerge (Medeiros et al., 2017 ), and research has not yet addressed the difference in ethical orientations among scholars.

Second, because perceived competition increases the adverse effects of a consequentialist ethical orientation on ethical research, leaders of academic units concerned with business research may want to reduce the intensity of competition. First, management could include teaching and service for the faculty and the scientific community as performance criteria to reduce the importance of research publications and the competitive pressure related to them. Second, management could de-emphasize journal-based output metrics and “assess research on its own merits rather than on the basis of the journal in which the research is published” (DORA, 2020 ). That action could reduce the competition for artificially scarce spots in top journals. Third, management could reward transparent (Whetstone & Moulaison-Sandy, 2020 ) collaborative research to counter the winner-takes-all mentality that is implicit in the (over-) emphasis on first authorship (Floyd et al., 1994 ; Krasnova et al., 2012 ). Finally, management could reduce overall work-related stress in academia (Urbina-Garcia, 2020 ) because those who cope better with competition-induced stressors may be less likely to resort to research misconduct.

Our study has limitations. First, the sample is limited to business research scholars. Researchers from China could not be reached because the Chinese authorities’ firewall blocked our invitation e-mail. Accordingly, we refer to a specific discipline and its research culture alone. To address this limitation, we suggest extending this research to other research fields and harvesting the Chinese perspective by sending invitations to academics to complete the survey from within the country. Because we guaranteed the respondents anonymity, we could not control for differences between the geographical locations of the researchers. However, the relationship between researchers’ ethical orientation and research misconduct, as well as whether it is contingent on autonomy and competition, may differ depending on the country context or the discipline. Neither did we account for different types of research approaches and research institutions. It could be argued that business researchers working with secondary data would consider research misconduct differently than those who engage in field studies in partnership with companies and managers. Also, ethical research may be easier to safeguard in natural sciences than in social sciences because empirical research investigating natural laws can be challenged by reproducibility (Fink et al., 2012 ). It is more difficult to reproduce findings in social sciences, such as business research, as the exact social situation is difficult to replicate.

Second, this study does not investigate the antecedents of researchers’ ethical orientation. Extending the model with those antecedents could enable the authors of future studies to formulate even more specific recommendations for reducing the threat of ethical misconduct in business research.

Third, while the relationship between deontology and misconduct is strong, the effect of the interaction between consequentialism and perceived competition is, although significant, less strong. Future research is needed to explore this interaction in more detail. For example, in addition to the perceived competition in terms of degree, the way in which researchers frame the competition they face in the workplace (Ryckman et al., 1996 ) may influence the effect of the interaction between consequentialism and perceived competition.

Fourth, our study is limited to one type of research misconduct: the falsification of results through the suppression of undesired responses. While this is a common (Behrens & Gray, 2001 ) and harmful practice (Chalmers, 1990 ), there are other types of research misconduct, such as those from the widely used FFP (fabrication, falsification, plagiarism) typology (Resnik et al., 2015 ). To address this limitation, we suggest extending research to these other types of misconduct (Hall & Martin, 2019 ). Doing so would, however, be challenging for those types of misconduct based on active deeds such as the fabrication of research data and results (the sin of commission) rather than suppressing undesired responses (the sin of omission), for example. This is because people judge acts of omission as less immoral than acts of commission (Spranca et al., 1991 ), which might bias the self-reporting of such behavior. Moreover, the purview of this study is limited to contract research for external clients. We call for replication of our study with vignettes covering fundamental research. Such vignettes could, for example, confront respondents with the need to decide whether or not to report rejected hypotheses in their submissions to scientific journals, knowing that papers including rejected hypotheses are less likely to be accepted for publication.

Future research could also investigate other moderators of the relationship between ethical orientation and research misconduct. For example, the academic workload is high worldwide (Shin & Jung, 2014 ), which can encourage unethical research (Schwepker & Good, 2017 ; Yam et al., 2014 ). The effect of an extensive workload and work pressure on researchers’ ethical conduct remains an attractive area of future inquiry. In addition, Covid-19 and its implications for the future of work affect academia in many ways. A salient point for the topic of unethical behavior may be the increased time spent working from home. Researchers working primarily in that manner may feel their work is less supervised and hence feel greater autonomy in their research. To the extent that this situation reduces the consequentialists’ expected likelihood of detection, it could increase research misconduct. Again, future research might test that possibility and which interventions could help researchers cope with stress in the new teleworking environment.

We conclude that researchers with a strong deontologist ethical orientation are less prone to engage in research misconduct, and they are also likely to have a more robust attitude in terms of autonomy and in the face of competition. Researchers with a strong consequentialist ethical orientation are more inclined toward research misconduct. However, the finding that competition influences the link between a consequentialist ethical orientation and research misconduct in business research can also be a stimulus to design academic workspaces that mitigate competitive pressures for those researchers.

Rainer Harms' part of the article is based on the study funded by the Basic Research Program of the HSE University.

Declarations

The authors have no relevant financial or non-financial interests to disclose. Rainer Harms' part of the article is based on the study funded by the Basic Research Program of the HSE University.

The study was performed in accordance with the national and institutional regulations as well as the ethical standards as laid down in the 1964 Declaration of Helsinki and its later amendments or comparable ethical standards. Informed consent was obtained from survey participants.

The study was granted exemption by the research ethics committee of the Faculty of Social Sciences, Economics & Business at the Johannes Kepler University Linz, Austria.

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Contributor Information

Matthias Fink, Email: [email protected] , Email: [email protected] .

Johannes Gartner, Email: [email protected] .

Rainer Harms, Email: [email protected] .

Isabella Hatak, Email: [email protected] .

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Bringing Excitement to Empirical Business Ethics Research: Thoughts on the Future of Business Ethics

  • Open access
  • Published: 15 September 2022
  • Volume 180 , pages 903–916, ( 2022 )

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  • Mayowa T. Babalola 1 , 2 ,
  • Matthijs Bal 3 ,
  • Charles H. Cho 4 ,
  • Lucia Garcia-Lorenzo 5 ,
  • Omrane Guedhami 6 ,
  • Hao Liang 7 ,
  • Greg Shailer 8 &
  • Suzanne van Gils 9  

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To commemorate 40 years since the founding of the Journal of Business Ethics, the editors-in-chief of the journal have invited the editors to provide commentaries on the future of business ethics. This essay comprises a selection of commentaries aimed at creating dialog around the theme Bringing Excitement to Empirical Business Ethics Research (inspired by the title of the commentary by Babalola and van Gils). These editors, considering the diversity of empirical approaches in business ethics, envisage a future in which quantitative business ethics research is more bold and innovative, as well as reflexive about its techniques, and dialog between quantitative and qualitative research nourishes the enrichment of both. In their commentary, Babalola and van Gils argue that leadership research has stagnated with the use of too narrow a range of perspectives and methods and too many overlapping concepts. They propose that novel insights could be achieved by investigating the lived experience of leadership (through interviews, document analysis, archival data); by focusing on topics of concern to society; by employing different personal, philosophical, or cultural perspectives; and by turning the lens on the heroic leader (through “dark-side” and follower studies). Taking a provocative stance, Bal and Garcia-Lorenzo argue that we need radical voices in current times to enable a better understanding of the psychology underlying ethical transformations. Psychology can support business ethics by not shying away from grander ideas, going beyond the margins of “unethical behaviors harming the organization” and expanding the range of lenses used to studying behavior in context. In the arena of finance and business ethics, Guedhami, Liang, and Shailer emphasize novel data sets and innovative methods. Significantly, they stress that an understanding the intersection of finance and ethics is central to business ethics; financial equality and inclusion are persistent socio-economic and political concerns that are not always framed as ethics issues, yet relevant business policies and practices manifest ethical values. Finally, Charles Cho offers his opinion on the blurry line between the “ethical” versus “social” or “critical” aspects of accounting papers. The Journal of Business Ethics provides fertile ground for innovative, even radical, approaches to quantitative methods (see Zyphur and Pierides in J Bus Ethics 143(1):1–16, https://doi.org/10.1007/s10551-017-3549-8 , 2017), as part of a broad goal of ethically reflecting on empirical research.

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Bringing the Excitement Back into Research on (Un)Ethical Leadership

Mayowa T. Babalola and Suzanne van Gils

Introduction

We, the co-editors of the Leadership and Ethics: Quantitative Analysis section, would like to use this occasion to congratulate the Journal of Business Ethics on its 40th anniversary. Compared to the long history of topics in business ethics, systematic research on ethical leadership only began to gain traction in the early 2000s—with some exceptions (e.g., Treviño, 1992 ). Since then, this area of research has grown substantially, with most research building on Brown et al.’s ( 2005 ) definition of ethical leadership as “the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to followers through two-way communication, reinforcement, and decision-making” (p. 120). Related leadership concepts such as authentic leadership, servant leadership, and respectful leadership have also gone through similar development trajectories, establishing relationships to outcomes such as organizational citizenship behavior, performance, and counterproductive work behavior, mediating mechanisms such as social learning and exchange, and personality or situational-based antecedents (Hoch et al., 2018 ).

While extant research in this domain to date has yielded valuable insights, we argue that research on leadership ethics has reached a point of stagnation when it comes to novel insights and that it may be time to bring the excitement back into the research on ethical leadership. In this commentary, we discuss our ideas on how this could be established and highlight recently published articles in the Journal of Business Ethics that could serve as examples.

In this commentary, we highlight some critical issues stifling the advancement of research on (un)ethical leadership. First, we discuss the need for critical disentangling or integrating of ethical leadership styles. Second, we suggest adopting innovative methodological approaches to assess constructs in the (un)ethical leadership domain. Third, we discuss ideas for extending the current understanding of (un)ethical leadership by exploring outcomes relevant to business and society and new trends in digital leadership and ethics. Finally, we emphasize the need to acknowledge different perspectives in the study of leadership ethics—on the one hand, by integrating the role of culture, follower influence, and the potential dark sides of ethical leadership, and, on the other, by reversing the lens and focusing more on follower influence. To conclude, we offer some tips and recommendations to authors aiming to advance the field of ethical leadership. In sum, this commentary offers guidance to authors on the kind of papers that will bring back the excitement into (un)ethical leadership research and provide significant learning opportunities for practitioners.

Critical Disentangling or Integrating of Ethical Leadership Styles

The field of ethical leadership is currently facing heavy critique for conceptual conflation and high intercorrelations between the different leadership styles (see Banks et al., 2021 ). Meta-analyses and reviews, on the one hand, advocate for a better definition and disentangling of the ethical leadership styles (Banks et al., 2021 ), and, on the other, show little incremental value of one style over the other (Hoch et al., 2018 ). Meta-analyses that provide critical suggestions on how the different leadership styles are similar or distinct (Banks et al., 2021 ; Hoch et al., 2018 ) are crucial for the advancement of the field. In this regard, we also repeat the call by Palanski et al. ( 2021 ) for studies that go beyond the usual conceptual suspects and perhaps even combine different leadership behaviors. Research on abusive supervision, defined as leaders’ hostile verbal and nonverbal behaviors, excluding physical contact (Tepper, 2007 ), could be an example. While abusive supervision has at times being treated as the opposite to ethical leadership, the literature has mostly discussed it as an independent construct with unique antecedents, outcomes, and related processes. Recent studies in this domain have addressed an increasing variety of antecedents and psychological effects (e.g., Almeida et al., 2021 ). While such approaches have been suggested for the domain of ethical leadership (Den Hartog, 2015 ), only a few studies have investigated these topics.

Bringing the Excitement Back Through Innovation of Research Methods

The field has also been criticized for its predominant reliance on survey research methods (Banks et al., 2021 ). This is, in part, because survey research limits the understanding of actual organizational dynamics. In this respect, novelty and excitement in the domain of concept clarity may come from studies that focus on ‘what leaders actually do’—investigating leader behaviors by using interview techniques (Haar et al., 2019 ), archival or big data, and experimental intervention studies (Palanski et al., 2021 ).

Bringing the Excitement Back Through Societally Relevant Research Questions

Another possibility for developing new and exciting research on leadership ethics is to focus on outcomes relevant to issues central to business and society today. Large numbers of studies have focused on a limited set of outcomes that put organizational performance center stage (e.g., employee ethical behavior, organizational citizenship behavior, and counterproductive work behavior; Banks et al., 2021 ; Den Hartog, 2015 ). In contrast, many fewer studies have focused on the effects of leadership ethics on outcomes that benefit individuals or society as a whole, such as employee well-being or stress-related outcomes (Vullinghs et al., 2020 ). While there is a wide range of potentially interesting outcomes that leadership ethics may influence, we argue that research on leadership and ethics is more suitable to address current societal challenges and questions. For example, what is the role of ethical leadership in addressing climate change? Or what is the role of ethical leaders in communities facing war, terrorism, and other life-threatening events? More research is also needed to understand how ethical leadership can be applied in digital and remote settings, as experienced during the Covid-19 crisis (Carsten et al., 2021 ). In addition, as work is increasingly digitalized and involves interaction with human as well as non-human actors, ethical leadership in the current age may involve a range of new dilemmas spanning from management of digital teams to monitoring of artificial intelligence and social media interactions. By addressing these questions, researchers will further advance our theoretical knowledge of ethical leadership and offer more valuable recommendations that meaningfully impact business and society and inform public policy.

Bringing the Excitement Back Through Acknowledgment of Different Perspectives

In addition to methodological innovations and societally relevant outcomes, new and exciting insights into ethical and moral leadership may also be derived from acknowledging different personal, philosophical, or cultural perspectives. For instance, a much-discussed but less addressed perspective lies in the domain of cultural and philosophical diversity of ethical perspectives. Various reviews have pointed to the domination of Kantian and WEIRD (Western Educated Individualist Rich Democratic) perspectives in the field of moral leadership (e.g., Eisenbeiss, 2012 ). Although many studies are submitted to the Journal of Business Ethics that rely on non-Western populations (e.g., Wang et al., 2021 ), those studies rarely propose extensions of ethical (leadership) theory through the integration of local cultural values or philosophies. This is unfortunate, because in particular values related to moderation (vis-à-vis indulgence), respect for tradition or ascription-based status that are central to the Buddhist or Islamic religion, or virtue ethics in general, are currently underrepresented in the Western-oriented definitions of ethics. One example of extension of research on business ethics through integration of cultural values can be found in recent research by Haar et al. ( 2019 ). They utilized the context of the Māori culture to show the importance of values such as humility, altruism, and cultural authenticity for ethical leadership perceptions. These concepts are central to the philosophy of ethics, but have not necessarily been discussed in depth in the context of (un)ethical leadership before. Thus, we suggest that there may be valuable insights gained from extending the current operationalizations of ethical leadership constructs and rethinking existing research models through the integration of values and philosophies that may be more central populations that are marginalized (Alm & Guttormsen, 2021 ) and in settings that include different cultural perspectives (Palanski et al., 2021 ). Future studies that integrate local cultural values into their theoretical model may be particularly insightful in guarding the field’s epistemic diversity and in helping to challenge some of our implicit assumptions on (un)ethical leadership.

Bringing the Excitement Back by Reversing the Lens

We also echo previous calls to look at the other side of the coin of ethical leadership by either taking a follower perspective or acknowledging that there may be negative effects of positive leadership (Palanski et al., 2021 ). Research that focuses on the influence of followers on ethical leadership can contribute to this theorizing, for example, by discussing when followers deviate from a course of action outlined by ethical leaders (Uhl-Bien & Carsten, 2007 ), or by discussing exceptions to positive effects of ethical leadership for some followers (Wang et al., 2021 ). Regarding the negative effects of ethical leadership, Stouten et al. ( 2013 ) showed that too much ethical leadership demotivates follower citizenship behavior. More research is needed to enhance further our understanding of the unintended negative effects of ethical leadership, and this may also help to rethink the necessary conditions for leadership to qualify as “ethical.”

Finally, numerous research studies have studied unethical forms of leadership from an actor-centric perspective or with a focus on temporal or daily dynamics (Liao et al., 2021 ). Such research is limited in the domain of ethical leadership (see Lin et al., 2016 , for an exception). In their study, Lin et al. ( 2016 ) found that leaders’ displays of ethical behaviors were positively associated with abusive behaviors the following day via ego depletion and moral credits from their earlier ethical behavior. This finding points to the need for more research on the potential costs and benefits of ethical leader behavior for leaders themselves. Research adopting an actor-centric perspective will help further clarify whether and under what conditions ethical leader behavior is beneficial versus detrimental to leaders’ own well-being. We would also like to encourage researchers to devote more attention to uncovering the dynamics and antecedents of ethical leadership in organizations. If ethical leadership promotes beneficial outcomes (Brown et al., 2005 ), why is this leadership behavior not embraced as expected?

Conclusion: Five Tips

Concluding this commentary, we suggest that authors may promote new excitement in the domain of leadership ethics through the following five tips:

Aim to advance the field through critical disentangling or integrating of ethical leadership styles;

Use new methods (experiments, big data) to investigate what leaders actually do;

Focus on societally relevant questions and outcomes, addressing the ethical challenges that business leaders face today;

Extend theorizing on ethical leadership by integrating marginalized perspectives and promoting cultural and philosophical diversity; and

Reverse the lens by investigating whether and how followers’ actions can facilitate or enhance ethical leadership practices in organizations.

Future of Psychology and Business Ethics

Matthijs Bal and Lucia Garcia-Lorenzo

We desperately need radical voices in these current times to enable a better understanding of the psychology underlying ethical transformations. Previous calls in the Journal (Islam, 2020) have already outlined the multilevel approach required to develop an engaged and current approach to a Psychology of Business Ethics that considers individual psychological behavior within the social, historical, and organizational contexts where it occurs. However, most work on the psychology of business ethics still shares a primarily quantitative micro focus on a single ethical variable (as IV or DV), presents mediation/moderation models trying to predict unethical behaviors in organizations and assumes that unethical behaviors are only those behaviors harmful to organizational performance. While some of these are relevant and interesting, too often papers do not really engage with the deeper issues underpinning the psychology of business ethics. We reiterate calls for building the future of this section, and, more broadly, the field of psychology and business ethics, with papers that have a greater emphasis on understanding the psychology of individual and group behavior, attitude, feeling, cognition, and decision making within the context where it is performed (cf. Islam, 2020). Understanding the psychology of ethical behavior in societal contexts will also allow the field of psychology to disengage from its tainted past (e.g., racism: APA, 2021 ) to radically redefine itself going beyond serving corporate or hegemonic interests (e.g., Bal & Dóci, 2018 ). Psychology can support business ethics by not shying away from grander ideas, going beyond the margins of “unethical behaviors harming the organization” and by expanding the range of lenses used to studying behavior in context, including more constructivist, performative, and processual approaches. Methodologically this would require an expansion of ways of looking beyond simple quantitative models used for prediction of specific behaviors with specific predictors. Ethical behavior cannot be merely explained based on a micro psychology focused on reproducing the status quo.

Any meaningful psychological research needs to understand human beings as embedded within the broader context of organizations, society, and ideological manifestations. Despite recent calls in the Journal to expand and deepen our understanding of the link between business ethics and psychological processes; creativity, critical thought, or imagination are often rather absent in the field. As a result, the standard Journal articles focusing on unethical behavior hardly contribute anything significant to the understanding of the psychology of business ethics. Only a marginal part of the total set of submissions dare to focus on interesting topics (e.g., prejudice, harassment, or moral reasoning), or apply interesting methodological approaches that shed new lights and perspectives on trite topics in the field of business ethics and psychology (e.g., through using qualitative methods, discourse analysis, or conceptual methods). The scarcity of these submissions, however, raises significant questions about the state of the art concerning psychology and business ethics.

Our approach follows and complements Islam’s (2020) call for a multilevel approach to structure research on the psychology of business ethics. We build on his framework to focus on explaining how such a framework may be translated into submissions to the section on Psychology and Business Ethics. Building on the multilevel model moving from societal contexts to intrapsychic contexts to explain the psychology of business ethics, scholars in our field can make meaningful contributions to the literature. First and foremost, we want to emphasize that publishing in academic journals should not be the sole focus of an academic career, despite the pressures scholars face as universities demand their scientists publish in (top tier) scientific journals to be able to secure a career in academia. While we are aware of the pressures, we would like to support the structural change required to turn the tide on the increasingly uninteresting, incremental, risk-avoiding research that has come to fill contemporary work psychology, management, and business ethics journals. Publishing on the topic of Psychology and Business Ethics should be rediscovered again as an endeavor to provide a meaningful contribution to our understanding of the broad topic of psychology and business ethics. We discuss in the following piece the ways through which we, as a community of psychologists interested in business ethics, can write papers that are more meaningful, relevant, and interesting to read for other scholars.

The Future of Psychology and Business Ethics

Too much research within the psychology of business ethics has implicitly adhered to the instrumental logic underpinning human behavior in the workplace (Bal & Dóci, 2018 ). In this logic, humans are instrumental to organizational performance and profit, and behavior not aligned with organizational goals is perceived as unethical . This is a somewhat surprising underpinning of work on the psychology of business ethics, as the American Psychological Association (APA) ethical code (a psychologist’s ethical code gold standard) clearly defines the duty of psychologists to respect and protect the dignity of human beings (APA Code, 2017 , Principle E). It is far from evident that organizational interests are aligned with the principle of human dignity, and a more critical engagement with such issues is necessary in the current era of neoliberal capitalism (Shymko & Frémeaux, 2021 ). Accordingly, business ethics has been hijacked too often as a tool for the improvement of organizational performance, based on the (mis)understanding that “more” ethics means better performance (e.g., Goebel & Weißenberger, 2017 ). For obvious reasons, this is a rather contested notion, as ample evidence shows that organizational un ethical behavior may constitute the main basis for profit. For instance, the destruction of the planet by energy and fossil fuel companies creates a basis for enormous profit, and there are serious questions to be asked about the ethics of individual and collective behavior in such organizations. Merely assessing whether these behaviors are counterproductive to organizational goals constitutes an insufficient perspective on the psychology of business ethics because it ignores the context in which such behaviors emerge (see Islam, 2020). What could or should research do to make meaningful contribution to the psychology of business ethics? In what follows, we discuss issues relevant to the development of greater understanding of this field.

Psychology Inherently Integrated in Context

Research that truly aims to make a contribution to understanding of the psychology of business ethics needs to consider the individual with or in the context, and thus, ethical behaviors, attitudes, feelings, cognition, and decision making (Islam, 2020) can only be properly understood when the context in which they emerge, are maintained or rejected is also explored. Thus, research on the psychology of business ethics needs to move beyond its current focus on individual rationality and revisit the understanding that ethical behaviors and morality are based on the interdependence between the self and other(s) as an ontological (existential) point of departure. Individual and relational rationality are two different forms of thought which determine the kinds of questions we pose about humans and their capacities and have fundamental implications for questions about the nature of thinking and knowing, about individual and social action, as well as about ethics and morality. A relational and contextual approach to ethical behaviors affirms that humans act in order to promote what they consider as good, just and worthwhile, even if what some consider as good, just and worthwhile, others judge as misery, injustice, and worthlessness. Whatever the meaning of good, just and worthwhile, contextualized ethical behaviors based on the interaction between self and other(s) are about the fulfillment of “living” (Taylor, 2011 ). It was Ricoeur who emphasized the idea of ethics as “good life.” He argued for the priority of ethics, that is, of the self’s search for the “good life” with others and with or in institutions based on justice, over what is usually called normative morality. Normative morality, while indispensable in social life, must be subsumed under ethics (Ricoeur, 1990 /1992). Contextualized ethical behaviors based on a self–other(s) interdependence permeate all daily thinking, communicating, and acting in organizations, and they are, therefore, of major interest to a renewed psychology of business ethics.

From this perspective, unethical behavior cannot be simply equated with behavior harming organizational interests, while the ethicality of the organization itself and its practices towards, e.g., the dignity of people and the planet (Bal, 2017 ) need to be also considered. To do so, it is also needed to challenge and move beyond the comfortable practices of quantitative research and the moderated-mediation model. Psychological research and practice is often projected to be value free, neutral, and objective, but there is increasing awareness of the fallacy of such assumptions, as, for instance, indicated by the acknowledgment and apology by the APA of its contribution to the perpetuation of systemic racism (APA, 2021 ). Hence, under the banner of “objective research” using quantitative research methods, psychology has too often fulfilled an ideological role, thereby favoring hegemonic interests in institutions, organizations and society at the expense of vulnerable groups. In light of such unethical past, psychology needs to engage with contemporary workplace issues in a more radical way to remedy its unethical historical legacy. Hence, fundamental questions need to be asked about the ethics of psychology in business, and what psychology has to offer society beyond the perpetuation of the status quo, and cozying up to hegemonic ideologies (e.g., Bal & Doci, 2018 ).

The world is currently facing a number of grand challenges, including the impact of climate change, increasing inequalities, populism, and racism. These challenges also impact on work experiences, and the role of psychology in addressing these issues is still under-acknowledged. While ethics is about the “right thing to do,” this has various implications for the psychology of business ethics: researchers in this field may focus more on the constraints and facilitating factors that contribute to individual attitudes, decision making and behavior in the context of these grand challenges of society. It is well established that more individuals in workplaces want to contribute to a more sustainable world and more sustainable workplaces, and the psychology of how such individual motives can be translated into meaningful action towards more sustainable organizations and societies is currently under-researched. Research in the field of the psychology of business ethics may play a meaningful role in assessing how individual behavior may contribute to addressing the grand challenges of global society, as well as assessing how individuals make sense of these grand challenges, and how this impacts upon their lives. As business ethics is about what constitutes the right thing to do in the context of work, individual behavior is ultimately key to understanding this process. Hence, we would like to call for a revaluing of psychology as the understanding of how individuals behave in the context of business ethics and grand societal challenges, such as the Sustainable Development Goals.

Psychology is currently in a state of crisis, whereby its legitimacy and meaning are questioned by both scholars and practitioners (Highhouse et al., 2020 ). In response to the legitimacy crisis of psychology, and the scarcity of responses generated by psychologists to great challenges of today, including increasing inequalities, climate change and polarization in society, it may be not so much a question of psychology becoming too radical, but of psychology not being radical enough . We, therefore, call upon psychologists to not shy away from asking questions about the bigger context, the bigger picture, to pose more critical questions about the state of psychology and its possible contribution to the understanding of the great challenges of today’s world and workplaces, and to question the hegemonic practices that may hinder scientific progress in our field.

Practical Recommendations

The psychology of business ethics goes beyond the study of micro-behaviors of individuals in organizations, disconnected from its broader context. We would welcome papers that attempt to scrutinize the bigger picture, and try to understand how individual behavior is shaped by societal contexts, and how individuals may contribute to the necessary transformation of business and society towards a “good life,” a more sustainable society and economy, while protecting the dignity of people and planet. Such bigger questions might be squeezed into moderated-mediation models, but they could only offer a simplified version of reality that is inherently limited to the extent that variables are captured into a model, which by definition means a selection of some variables at the expense of potentially other important factors. Instead, psychology is in desperate need of more diversity in ontological and epistemological frameworks to guide our research. Research that moves beyond the all too familiar moderated-mediation model to address bigger questions of today’s world would be most welcome for the Journal. Processual and performative approaches that study how ethical processes emerge from a psychological perspective would shed more light on contemporary issues. This way, more understanding can be generated about how unethical behaviors emerge and become consolidated and taken for granted. Research could also investigate how unethical behavior is performed in daily life in actual workplaces. Observational research would be a useful method to achieve such aims, and would force psychologists to “move out of the lab into the real world,” to assess what is actually happening in contemporary workplaces, and what the ethical dimensions of contemporary workplaces are.

Thus, we call for a psychology of business ethics that supports and promotes engagement with real world problems and aims to have an impact on the type of change necessary for sustainable development and well-being.

Business Ethics Issues in Finance: Challenges and Recommendations

Omrane Guedhami, Hao Liang and Greg Shailer

Public interest in the ethical aspects of finance and related behaviors and activity is reflected in the growing number of submissions to the Finance and Business Ethics section at the Journal of Business and Ethics (JBE). Our objective in the following discussion is to provide a better understanding of the domain of Finance and Business Ethics by first describing some recurring issues with submissions to the Finance and Business Ethics section. We then provide some guidance as to where we see opportunities for meaningful contributions to the finance-ethics literature. This includes advocating for more diversity in empirical methods and the use of novel data, and identifying some areas we think are important but relatively under-researched.

In this commentary, we highlight the importance of combining innovative and rigorous analysis with fundamental economic questions when studying the intersection between business ethics and finance. We first outline some major issues associated with conducting research on ethical issues in finance, and then discuss possible directions in which finance and business ethics research might be further developed and integrated; this includes encouraging methodological diversity and identifying research areas we believe are important but under-researched.

Challenges in Conducting Research on Finance and Business Ethics

Relevance to scope.

To provide a substantial contribution to knowledge at the intersection of business ethics and finance, a study might offer new insights that advance our understanding of ethical issues in finance, or use knowledge or expertise from the finance field to contribute to a larger conversation about ethics. A major issue we encounter when reviewing manuscripts submitted to our section is that many do not offer sufficient contribution to our knowledge of business ethics. Many such studies lack a genuine ethics dimension—with any reference to ethics being largely gratuitous—and a sound theoretical framework and hypothesis development that is grounded in the business ethics literature.

As section editors, we observe two noteworthy types of submissions to the Finance and Business Ethics section that exhibit one or more of the above deficiencies. The first type typically relies on the finance literature and theories, while omitting a persuasive reference to the business ethics literature. For example, a substantial number of rejected submissions have adopted an agency perspective to examine the relations between ownership structure (e.g., family, government, employee, institutional) and corporate financial performance (e.g., profitability, valuation, cost of capital) or outcomes (e.g., payout policy, investment, risk, capital structure, CEO compensation, CEO turnover). Other examples include examining aspects of risk taking by financial and non-financial corporations, assuming that it is detrimental to stakeholders, and examining the determinants or implications of gender diversity for corporate outcomes. It is accepted that agency and ownership issues, risk-taking behaviors, and diversity issues can be meaningfully examined from an ethics perspective, but this does not mean such topics are inherently concerned with or contribute to knowledge in ethics, and it is incumbent on authors to persuasively establish the ethical dimensions or relevance of the study. Even when topics studied have some obvious broad connections with business ethics (e.g., earnings manipulation, fraud, tax avoidance, treatment of employees, greenwashing, pollution), the ethical analysis or ethics implications are usually not sufficiently developed, and the discussion of findings and their implications is largely focused on performance or risk consequences. In possibly gratuitous attempts at satisfying JBE’s scope requirement of business ethics relevance, some manuscripts sporadically include the term “ethics” (often concentrated in the introduction and conclusion), or tangentially refer to studies on related topics that were previously published in JBE. Footnote 1 This does not bring a manuscript within the scope of JBE’s editorial objectives.

The second noteworthy scope-related deficiency is observed in submissions that largely exclude meaningful and contextualized theory reviews or development, thus, failing to present a theoretical framework and hypotheses that are grounded in the business ethics literature; usually, they instead emphasize datasets and research design. For these submissions, we observe that the contributions largely focus on the finance literature or empirical methods, with no meaningful engagement with the business ethics issues. The motivation (introduction) section of some of these submissions does not develop any theoretical arguments, and the background literature relates primarily to finance. Examples of studies exhibiting these deficiencies include some that merely compare the performance of socially responsible or Islamic stocks and funds to conventional stocks and funds, or the performance of socially responsible investing during times of crisis. While some of these papers may rely on novel data or sophisticated portfolio construction approaches, the link to business ethics is not sufficiently established and the theoretical development lacks the ethical framing or rigor appropriate to this journal.

Originality and Contribution

The Finance and Business Ethics section aims to publish original work that has the potential to be influential or have high impact in the domain of business ethics, while intersecting in some way with finance. In our review of submitted manuscripts, we encounter many that do not offer a sufficient contribution that meets the threshold for JBE. Some are of high quality in terms of word craft and empirical execution and satisfy the business ethics relevance requirement, but essentially replicate prior studies, using updated or expanded samples or different countries. Replications can be useful and provide additional insights into previously studied ethical issues in finance, but they do not necessarily contribute sufficient new insights if the motivation is not convincing, the theoretical development is weak, or the results are intuitively obvious or merely confirm existing evidence. To make a contribution with a different sample, one needs to carefully consider and elaborate on how such a setting offers some particular institutional features that allow the study of important business ethics questions that prior studies were not able to address.

In our view, studies exhibiting high-quality execution and writing, but insufficient originality and contribution to the domain of finance and business ethics, include those that examine financial market participants’ assessments of CSR practices, and their implications for other corporate policies, corporate performance, or risk. In addition to the challenge of establishing whether such studies exhibit sufficient relevance to business ethics, the literature addressing these issues is large and relatively mature.

Rigor in Empirical Execution and Analysis

In evaluating the design and execution of any analysis, we emphasize its quality and rigor. Most submissions to the Finance and Business Ethics section involve empirical analysis, with a variety of qualitative and quantitative approaches. Here, we outline some of the more common empirical weaknesses that can be avoided. We also note that studies with substantial weaknesses in their empirical design (including the extent of their ethical focus) or execution are also more likely to exhibit other substantial problems.

Our suggestions here should be read as indicative and not as a checklist. First, many submitted papers that we encounter lack sufficient transparency with respect to sample selection and characteristics. A good paper will provide a sufficiently detailed description of the sample selection process. This might include explaining the desirability of novel sampling strategies or justifying why a sample period stops earlier than appears necessary. Second, and related to the preceding point, a paper should include appropriate descriptions of sampling distributions (e.g., by industry and year) to give readers important information they can use when assessing the study design and results. Third, while innovations or improvements in empirical design are encouraged, they must be rigorously developed and justified, rather than appearing ad hoc . Fourth, as we discuss below, reported analyses should seriously address endogeneity issues.

Many relations within and between firms’ characteristics, behaviors, performance, and environments are inherently endogenous. This is common across many analyses in the business and applied economics domain. Here, we emphasize how important it is that future studies address these issues in a rigorous manner. It is reasonable to provide a clear discussion of the sources of endogeneity threats (e.g., omitted variables, reverse causality, measurement errors) that are specific to the reported study, use suitable methods to address the identified concerns where feasible, and report the appropriate diagnostic tests associated with each approach (e.g., tests of the validity of instruments, tests of overidentifying restrictions). Endogeneity issues are particularly critical in research that examines the direct or moderating effects of firm characteristics (e.g., CSR actions or performance, corporate governance features) that are reasonably theorized (or known) to be endogenously determined with the dependent variable or with other explanatory variables; in the latter case, this may also give rise to multicollinearity concerns. These issues threaten the validity of the modeling, not merely the interpretation and generalizability of results. Finally, we suggest that subjecting the main evidence to substantive sensitivity checks should be a common practice to reduce the likelihood that findings attributed to ethical decisions or practices do not have other credible explanations.

Future Directions

We do not seek to present a detailed research agenda for the finance–business ethics domain but offer some thoughts regarding potentially fruitful areas that researchers might consider. We do this in two stages. First, we comment on the potential for exploiting new or novel data and innovations in analytical tools, with some general examples. We then describe some areas that we believe offer opportunities to shed new light on ethics in relation to finance.

Novel and Innovative Empirical Developments

Strategic attempts to develop publications based on novel datasets or innovations in analytical methods face some challenges. Novelty and innovation are not, by themselves, necessarily interesting or meaningful. The value of novelty and innovation in datasets or methods arises from the extent to which their use advances knowledge in a particular field: they might be better regarded as improved “tools,” and their use is not the contribution. If using a new dataset or an advance in econometrics merely provides confirmation of previously accepted findings, it will be difficult to establish sufficient contribution. If a novel dataset does not allow for generalizable results, the authors face the challenge of convincing reviewers and editors that the findings will be of sufficient interest to the journal’s readers. But despite these and other challenges, developments in data access and analytical methods offer significant opportunities for advancing knowledge. In identifying some of these developments below, it is not our intention to suggest specific research topics; we seek to give some general indications of means by which the literature might be advanced—but we encourage readers to consider how these might be exploited in developing some of the research areas suggested in the next part. How this might be implemented is, of course, a contextual challenge for the researcher to address.

Some innovations in empirical methods (e.g., network analysis, textual analysis) and novel datasets have emerged recently in finance and other areas of business research that are currently underexploited in advancing our knowledge of business ethics in relation to finance. Studies in business and finance are increasingly deploying datasets from other fields to identify or proxy for the effects of environmental factors, such as satellite data that can reveal urban and industrial density and development levels or pollution effects, environmental emissions data, climate data, traffic data, population health data, crime data, data from large multi-user platforms, and datasets from various forms of social media. These (often big) datasets offer potentially rich measures of factors that might motivate or influence responses to ethical issues, or might enable the identification of ethics issues from different perspectives. For example, one might infer the external acceptance of a corporation’s concern about a community’s welfare by analyzing customer feedback or the sentiment of social media messages related to the corporation.

The use of Big Data sources and methods has helped answer important questions in the finance domain that previously could not be answered using traditional archival data. For example, business and finance researchers are using machine-learning techniques to make finer or more nuanced predictions and to conduct more sophisticated textual analysis to construct more granular empirical measures or properties and discover the extent to which they can reveal otherwise difficult-to-observe behaviors, motives, or expectations and relations between them. For example, there are opportunities to follow recent studies of the language properties of earnings announcements and conference calls with analysts (such as the tone of managers’ statements or analysts’ queries, particular word usage, tenses, or other language traits) to gauge awareness of or responses to concerns about ethical issues, and perhaps then examine whether such awareness or responses are predictable or predictive of other behaviors or outcomes. Future work addressing these ethical issues in the context of finance are warranted. However, if using novel datasets and techniques involves proprietary data or sensitive information on individuals, researchers must be mindful of any limitations and potential ethical challenges this entails. Novel data sets might also introduce noise that impedes the reliable identification of effects concerning ethical decisions.

Various forms of network analysis have been used to examine peer effects on behaviors or choices in the business and corporate governance domains. These have been examined as potential consequences of diverse forms of networks, including (1) corporate networks arising from supply chain relationships, interlocking or common directorships, common shareholders, or common analyst coverage, and (2) networks as products of implied social or professional relationships between various types of decision makers. While network analysis is not new in the business domain, we think there is considerable scope to exploit this approach to investigate the extent and nature of peer effects in relation to ethics issues in the finance domain.

Some studies have used laboratory and field experiments to help with causal inference and explore the behavioral foundation of ethical decision making in finance, although historically these have faced substantial generalizability problems. A recent development here is “neural finance” studies that aim to identify the neural basis of decision making by measuring neuronal activities with the help of functional magnetic resonance imaging (fMRI) and other brain scanning techniques. This has the potential to predict outcomes from ethical decision making by observing neuronal activities that are associated with other well-documented decisions.

As a general caution at this stage, we note that research exploiting new or novel data to construct new measures must justify them conceptually and in terms of rigor. Researchers should also be aware of the potential social and ethical concerns associated with using data that involve detailed personal-level information. In the case of laboratory and field experiments, the research may even alter subjects’ pecuniary incentives and social behavior.

Areas for Future Research

The preceding discussion briefly considers the potential usefulness of recent developments in the availability of different forms of data and methods. In this final section, we take on the more ambitious task of identifying particular areas that we believe warrant more research attention because they may yield substantial advances in our understanding of ethics in relation to finance. Again, our commentary is brief and broad. It is only intended to encourage interest in areas we believe will help develop the finance and business ethics literature, and we do not mean to discourage work in areas we do not identify here.

The intersection of finance and ethics is a subset of business ethics, not a thing apart. The providers and users of financial products and services, and other participants in financial markets, share the contemporary responsibilities of all businesses to recognize and respond to the legitimate expectations and demands of stakeholders. Such expectations and demands include the nature and use of products and services, their engagement with and treatment of investors, employees, suppliers and customers, and environmental and social impacts. To this end, positive ethical values should be at the core of their corporate cultures, and evident in participant behavior. The ethical dimensions of behavior in this regard might overlap with legal, socio-economic, and political dimensions, but they are not the same constructs. It is important to keep this in mind when reading our comments to avoid mistakenly interpreting issues associated with social responsibilities or impacts, regulatory obligations and compliance, or political connections and effects as inherently ethics issues. Usually, ethics issues entail conflicting interests, personal dilemmas, or under-weighting harm to other stakeholders.

Financial equality and inclusion are persistent socio-economic and political concerns in both developed and developing economies. While the social and political consequences of inequality or exclusion are not always framed as ethics issues, relevant business policies and practices can manifest ethical values. Businesses can both contribute to the emergence of inequalities and exploit such inequalities (for example, when they relocate to reduce operating or regulatory costs, or by taking advantage of less informed market participants) and can mitigate such problems by advancing policies and implementing practices that facilitate financial inclusion of members of society who might otherwise be marginalized, such as minority groups and the poor. But, at this stage, we have little robust evidence of how policies and practices in the financial sector can impact equality and inclusion, or the incentives or disincentives for pursuing such goals, and the ethical values or trade-offs that are entailed in relevant decisions.

Related to the previous area, microfinance can be socially and economically vital for people in lower economic strata, particularly in developing countries, but requires the embodiment of positive ethical values in the corporate cultures of providers, and supplier confidence in the ethics of those presenting themselves as borrowers. Recent research in some ethical aspects of microfinance has been facilitated by access to novel datasets, including crowdsourcing for microfinancing, but we remain at the early stages of developing the ethics literature in this area.

Related to both the previous paragraphs, prior work in the socially responsible investment (SRI) literature has some relevance but does not necessarily address ethical issues we think are important. For example, how might we evaluate the ethics of investing in an environmentally harmful technology to provide immediate social benefits and then later seek to mitigate the harm? Or whether expected indirect social impacts of investment, such as theorized “trickle-down” effects, can be judged as ethically comparable to direct social impacts? And what ethics criteria might facilitate the comparison? What are the ethical issues confronting investors (or other stakeholders) when they weigh and compare SRI effects on winners and losers if SRI strategies also entail divestment strategies (such as the community and employment effects of withdrawing financial resources from “sin” industries, which are then directed to more socially preferred industries)? Similar questions might be asked about the ethics issues for investors in weighing other negative and positive externalities, and the extent to which investors’ ethical preferences in this regard should influence corporate decision. Relatedly, when might socially preferred financing decisions conflict with some stakeholders’ extant ethical principles, and what are the social and ethical implications of such conflicts?

There is also considerable opportunity for research that will advance our understanding of finance-related decisions that intersect with prominent topical social questions. For example, can we better inform debate about the role of financial institutions in enabling or constraining intimate partner abuse, or expectations of decision making involving cross-border financial arrangements during periods of economic, political, or civil conflict that might range from trade conflicts to wars between countries?

On a different tack, the complexities of mathematical models and tools used in risk management generally work to reduce the transparency and accountability of the decisions they facilitate, which can affect diverse groups of stakeholders. This is particularly evident in previous financial crises. But we have little knowledge of the ethical issues involved in implementing risk management strategies. Integral to this are deficiencies in our understanding of the values associated with taking and avoiding risks, and how to observe the ethical commitment of managers.

In all decision making pertinent to the finance domain, there will be conflicts between the pecuniary and ethical preferences (and other non-pecuniary preferences) of individuals, and between the preferences of managers, investors, advisers, consumers, and other stakeholders. How to identify, model, and test such differences, and consequential actions and outcomes, presents a major—but potentially very important—research challenge.

We do not offer any resolutions to the empirical challenges in investigating finance-related decisions and practices that might entail ethical dilemmas or trade-offs, but we return to our earlier comments about the continuing emergence of new data and analytical tools that more imaginative researchers might be able to exploit for this purpose.

The Blurry (?) Line Between Accounting Ethics and Social/Critical Accounting Research

Charles H. Cho

Over the past several years, some intrigued scholars, in particular working in the area of social and critical accounting, have—formally and less formally—raised questions about what would constitute a submission “in scope” with accounting ethics. While the answer is not as clear-cut as expected, I provide in this commentary some insights based on my own experience as an author, reviewer, and Section co-editor of the Journal.

As Section Co-Editor of the Accounting and Business Ethics section, I regularly get asked whether a specific (accounting research) paper would be a good “fit” for possible publication—and my response always relates to which extent “ethics”—be this an ethical issue, concept, theory, or even story—is central and explicit to the paper. The papers that generally come to my attention (pre-submission, or submitted) are either “easy” to assess for suitability, or lack thereof (e.g., a clear, pure “mainstream” capital markets paper that sometimes includes a few references from JBE and/or an instrumental variable such as gender for diversity to proxy for ethics), or more on the fence (e.g., a “critical” accounting paper that challenges the status quo or the current capitalist system, or a “social” one dealing with corporate social responsibility (CSR) or sustainability issues). On the latter, the “ethicality” is not always evident, which leads me to either send it back to the authors to make it more so—or reject it before review because I see no viable path. This can be challenging at times, but I do believe that, while not always hard and clear, there is still a (possibly blurry) line between what makes an accounting paper “more ethics” versus “social” or “critical”—and these are of course not mutually exclusive either. To me, it really comes down to how accounting research is portrayed in terms of paradigms.

Paradigms in Accounting Research

In the very first class of my PhD program ( Foundations of Accounting Research ) at the University of Central Florida, we did not “dig into” accounting research papers right away. Instead, we were exposed to the first four chapters of Burrell and Morgan’s ( 1979 ) emblematic book. While their proposed model to explain paradigms could be argued to be limited, limiting, and/or outdated, I still believe that, to date, it is one that effectively best explains what “paradigms” are and why it is important to understand the (research) world through them. In particular, Burrell and Morgan ( 1979 ) introduce a 2 × 2 matrix scheme to help classify and understand sociological theories based on four major paradigms (adapted from Fig. 3.1 “Four paradigms for the analysis of social theory,” Burrell & Morgan, 1979 , p. 22).

SOCIOLOGY OF RADICAL CHANGE

  • SOCIOLOGY OF REGULATION

Functionalist Paradigm (Objective-Regulation)—Individualism

This is the dominant paradigm for organizational studies, notably in accounting (mainly due to the nature of our discipline and training). Most accounting research belongs to this paradigm with a range of beliefs. Archival research in accounting using financial data(bases) sits on this side of the spectrum. In particular, positivist theory, capital markets research and valuation models are rooted in this paradigm.

Radical Structuralist Paradigm (Objective-Radical)—Materialism

This paradigm has a perspective of inherent structural conflicts within society that create constant change through political and economic crises. It is concerned to develop a sociology of radical change from an objectivist standpoint. In terms of research spectrum position, archival accounting research using other types of data (non-accounting) and advocating a more critical view of the world belongs here. Yet this research still utilizes secondary data and statistical models.

Interpretative Paradigm (Subjective-Regulation)—Collectivism

This paradigm is concerned to subjectively understand the world as it is and the fundamental nature of the social world. Interpretivists seek to understand the very basis and source of social reality, the essence of everyday world. The very broad areas of behavioral, social, and organizational of accounting research would fit well here. Examples of methodology that illustrate this research type would be surveys, questionnaires, case studies, ethnography, phenomenological studies, and some content analysis.

Radical Humanist (Subjective-Radical Change)—Idealism

Proponents of this paradigm are primarily interested in releasing social constraints that connect human development. It is designed to critique the status quo and tends to view society as anti-human. Sources of this paradigm are the same as the interpretivist paradigm, notably Kant, Hegel, and early Marx. However, Marx inverted the frame of reference reflected in Hegelian idealism and forged the basis for radical humanism. In essence, this paradigm is the “perfect” opposite of the functionalist view. Often referred as an anti-organizational theory, the critical research in accounting fits remarkably well into this paradigm and is greatly hosted.

Accounting Ethics Versus Social/Critical Accounting Research

Based on the above sociological paradigms, research perspectives, experiences, and even careers can dramatically vary across accounting scholars. This is so fundamental and foundational that it shapes a researcher’s—or even a person’s—view of the world (which in turn influences one’s view of research). We know that that “mainstream” accounting research is rooted in neo-classical economics theories and primarily, if not only, focuses on the efficiency of the capital markets. That itself emanates from the functionalist paradigm, but while it may seem difficult or impossible to tease out any ethical or ethics-related issues from that “camp,” studies looking at unique settings or factors associated with earnings manipulation (as a non-ethical construct) could in fact constitute a potentially good fit for JBE, in my view. But I do reiterate uniqueness .

Interestingly, such studies may be more likely to contribute to the accounting ethics literature than some that are couched in the interpretative or even radical humanist paradigm (and note that I am not commenting on the methods used—they are irrelevant in this discussion). There is no doubt that social accounting or critical accounting research papers belong to these left-handed, subjective paradigms, but they are not necessarily accounting ethics papers—and it is acceptable, because not every social or critical accounting paper must be an accounting ethics paper. Admittedly, there was a period where JBE did publish research (including mine!) that provided evidence of greenwashing practices (in other words, companies lying in their reports)—but the Journal’s editorial aims and scope have changed—rightfully so—to put ethics back to its core (see the last editorials). I believe that accounting ethics research is, or at least needs to be, a more subtle and “grey area” than greenwashing or CSR or emancipatory issues. There are other wonderful “homes” for this research such as Accounting, Accountability & Auditing Journal, Accounting Forum, Critical Perspectives on Accounting, Social and Environmental Accountability Journal or Sustainability Accounting, Management and Policy Journal. I also see JBE as a specialized journal, in the same way we have some journals for taxation, auditing, or information systems (or CSR). The ethics must be there, almost omnipresent, explicit, and central.

I will end by quoting the following superbly crafted comments from Lennard and Roberts (forthcoming, p. xx) about the challenges of undertaking CSR research (hence part of social accounting research) from an ethical frame:

First, accounting researchers need to make the explicit decision to study [CSR] issues from an ethical perspective. Making the decision to study [CSR] issues does not automatically default to being a study of accounting and business ethics. A substantial amount of accounting research dealing with [CSR] issues study their instrumental effectiveness in improving financial performance or some derivative of financial performance such as a lowering of the cost of capital, averting costly regulation, or avoiding reputational harm. If an accounting researcher is interested in studying the ethics of [CSR], then the theory driving the study should have an ethical grounding. This leads to a second challenge—finding a […] theory [grounded in the ethics literature] that matches well with the research question under study. For example, researchers are often interested in how corporations’ [CSR] performance affects their stakeholders. Stakeholder theory is not necessarily an ethical frame from which to investigate a research question. There are several streams of stakeholder theory, including instrumental stakeholder theory, intrinsic stakeholder theory, and feminist stakeholder theory. Further, there are many ethical theories beyond just the two that have been maintained in extant accounting ethics (i.e., utilitarianism and deontology) which may be crucial in furthering ethical research on [CSR], yet researchers must acknowledge there is significant responsibility when prescribing ethical theories to scientific studies. A major concern when studying business ethics is that ethical theories may conflict, and researchers must make decisions on how to deal with these conflicts. The third challenge for accounting researchers interested in undertaking [CSR] ethics research is specific to those wanting to do large sample empirical research. It is growing increasingly difficult to empirically test ethical theories using large sample, cross-sectional methodologies.

As highlighted and perfectly summarized by Lennard and Roberts, social accounting research (and the same applies for critical accounting) is not a by-default synonym with research in accounting ethics. Though these terms—ethics, CSR, sustainability—are often put together under one “umbrella” or in one “basket,” there are boundaries and I believe the role of the Accounting and Business Ethics section of JBE, at least part of it, is to keep a close eye on this blurry (?) line and those boundaries.

In earlier years, JBE accepted some manuscripts that were essentially tangential or peripheral to the ethics domain, including many relating to CSR and environmental impacts, but the journal has ceased this practice in a return to its core mission of advancing knowledge in relation to business ethics, as signaled in a series of editorials that started with Greenwood and Freeman ( 2017 , 2018 ). To appreciate the journal’s return to its intended domain, authors should carefully read the Aims & Scope statement on the journal’s homepage and editorials published in JBE.

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Babalola, M.T., Bal, M., Cho, C.H. et al. Bringing Excitement to Empirical Business Ethics Research: Thoughts on the Future of Business Ethics. J Bus Ethics 180 , 903–916 (2022). https://doi.org/10.1007/s10551-022-05242-7

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Received : 03 April 2022

Accepted : 11 August 2022

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Issue Date : October 2022

DOI : https://doi.org/10.1007/s10551-022-05242-7

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In this new survey for the IBE, Ethical Risks 2024 , we aimed to capture and report business leaders’ rating of ethical risk concerns for businesses. After all, understanding ethical risks is the starting point for taking action on ethics in any organisation. In the IBE Business Ethics Framework , an ethics programme begins with an ethics risk assessment for the organisation.

By sharing this data, we hope to help organisations compare their ethical risk analysis to others and provide a broader understanding of the ethical risks faced by business leaders.

Key findings

  • Economic conditions are the highest-ranked risk factor based on aggregate scoring and can be seen to drive many of the other risks including fraud, theft, improper spending of company money (including expenses) and false accounting and reporting.
  • The retail sector and small and medium-sized businesses ranked concern for vulnerable customers and fair treatment of customers highly. Larger organisations may be missing an important issue here by placing customers at a lower priority than other issues in an economic climate where it really matters.
  • Fair pay and employment conditions are in 9th place. Remuneration and reward is ranked as 25th on the list. The IBE’s Attitudes of the British Public to Business Ethics survey shows that the British public is consistently concerned about pay, especially executive pay. Business leaders are at risk of being out of touch on this issue.
  • Climate-related risks and use of artificial intelligence ranked lower than public debate might have suggested.

Download the survey below to find out more.

The IBE would like to thank SSE plc for their generous financial support of this survey. 

Simply click the link below to download the survey results, then you'll be prompted to login.

Don't have a profile?  Please register , it's free and open to all website visitors.  

If you have any issues please email,  [email protected]

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K-12 students learned a lot last year, but they're still missing too much school

Cory Turner - Square

Cory Turner

Headshot of Sequoia Carrillo

Sequoia Carrillo

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From 2022-2023, chronic absenteeism declined in 33 of the 39 states AEI looked at. But it was still a persistent problem: In a handful of places, including Nevada, Washington, D.C., Michigan, New Mexico and Oregon, roughly 1 in 3 students – or more – were chronically absent. LA Johnson/NPR hide caption

From 2022-2023, chronic absenteeism declined in 33 of the 39 states AEI looked at. But it was still a persistent problem: In a handful of places, including Nevada, Washington, D.C., Michigan, New Mexico and Oregon, roughly 1 in 3 students – or more – were chronically absent.

It's going to take aggressive interventions to repair the pandemic's destructive impact on kids' schooling.

That's the takeaway of two big new studies that look at how America's K-12 students are doing. There's some good news in this new research, to be sure – but there's still a lot of work to do on both student achievement and absenteeism. Here's what to know:

1. Students are starting to make up for missed learning

From spring 2022 to spring 2023, students made important learning gains, making up for about one-third of the learning they had missed in math and a quarter of the learning they had missed in reading during the pandemic.

That's according to the newly updated Education Recovery Scorecard , a co-production of Harvard University's Center for Education Policy Research and The Educational Opportunity Project at Stanford University.

6 things we've learned about how the pandemic disrupted learning

6 things we've learned about how the pandemic disrupted learning

The report says, "Students learned 117 percent in math and 108 percent in reading of what they would typically have learned in a pre-pandemic school year."

In an interview with NPR's All Things Considered , Stanford professor Sean Reardon said that's surprisingly good news: "A third or a quarter might not sound like a lot, but you have to realize the losses from 2019 to 2022 were historically large."

When the same team of researchers did a similar review last year, they found that, by spring of 2022, the average third- through eighth-grader had missed half a grade level in math and a third of a grade level in reading. So, the fact that students are now making up ground is a good sign.

These results do come with a few caveats, including that the researchers were only able to review data and draw their conclusions from 30 states this year.

2. Despite that progress, very few states are back to pre-pandemic learning levels

The Harvard and Stanford study of student learning includes one sobering sentence: "Alabama is the only state where average student achievement exceeds pre-pandemic levels in math." And average achievement in reading has surpassed pre-pandemic levels in just three of the states they studied: Illinois, Louisiana and Mississippi. Every other state for which they had data has yet to reach pre-pandemic levels in math and reading.

"Many schools made strong gains last year, but most districts are still working hard just to reach pre-pandemic achievement levels," said Harvard's Thomas Kane, one of the learning study's co-authors.

3. Chronic absenteeism also improved in many places ... slightly

The rate of chronic absenteeism – the percentage of students who miss 10% or more of a school year – declined from 2022 to 2023. That's according to research by Nat Malkus at the conservative-leaning American Enterprise Institute (AEI). He found chronic absenteeism declined in 33 of the 39 states he studied.

Yes, "the differences were relatively small," Malkus writes, but it's improvement nonetheless: "the average chronic absenteeism rate across these states in 2023 was 26 percent, down from 28 percent for the same 39 states in 2022."

Glass half-full: Things aren't getting worse.

4. But, again, chronic absenteeism is still high

Malkus found chronic absenteeism was at 26% in 2023. Before the pandemic, in 2019, those same states reported a rate of 15%. That adds some painful context to the "good news" two-point decline in absenteeism from 2022 to 2023. Sure, it's down, but it's still so much higher than it was and should be.

Think of it this way: In 2023, roughly 1 student out of 4 was still chronically absent across the school year.

In a handful of places, including Nevada, Washington, D.C., Michigan, New Mexico and Oregon, roughly 1 in 3 students – or more – were chronically absent. That's a crisis.

Research shows a strong connection between absenteeism and all kinds of negative consequences for students, including an increased likelihood of dropping out of school.

Chronic absenteeism also hurts the students who don't miss school. That's because, as the learning study's authors point out, when absent students return, they require extra attention and "make it hard for teachers to keep the whole class moving."

5. Poverty matters (as always)

Both the learning and the chronic absenteeism studies capture the headwinds that constantly buffet children in poverty.

"No one wants poor children to foot the bill for the pandemic," said Harvard's Kane, "but that is the path that most states are on."

On learning: Reardon told NPR "the pandemic really exacerbated inequality between students in high-poverty and low-poverty districts and students of different racial and ethnic backgrounds."

In 2023, students' academic recovery was relatively strong across groups, which is good – but it means "the inequality that was widened during the pandemic hasn't gotten smaller, and in some places it's actually gotten larger," Reardon told NPR.

In fact, the report says, "in most states, achievement gaps between rich and poor districts are even wider now than they were before the pandemic." The learning study singles out Massachusetts and Michigan as the states where those gaps in math and reading achievement widened the most between poor and non-poor students.

Similarly, Malkus, at AEI, found that, between 2019 and 2022, rates of chronic absenteeism rose much more in high-poverty districts (up from 20% to 37%) than in low-poverty districts (up from 12% to 23%).

"Chronic absenteeism has increased the most for disadvantaged students," Malkus writes, "those who also experienced the greatest learning losses during the pandemic and can least afford the harms that come with chronic absenteeism."

6. Families must play an important role in learning recovery

Both studies acknowledge that families must play an important role in helping students – and schools – find a healthy, post-pandemic normal. The problem is, surveys show parents and guardians often underestimate the pandemic's toll on their children's learning . "Parents cannot advocate effectively for their children's future if they are misinformed," says the learning study.

To combat this, the learning researchers propose that districts be required to inform parents if their child is below grade-level in math or English. Those parents could then enroll their students in summer learning, tutoring and after-school programs, all of which have benefitted from federal COVID relief dollars. That funding is set to expire this fall, and some of these learning recovery opportunities may dry up, so the clock is ticking.

7. There's a "culture problem" around chronic absenteeism

Reducing chronic absenteeism, Malkus says, will also depend on families.

"This is a culture problem," Malkus tells NPR. "And in schools and in communities, culture eats policy for breakfast every day."

By "culture problem," Malkus is talking about how families perceive the importance of daily attendance relative to other challenges in their lives. He says some parents seem more inclined now to let their students miss school for various reasons, perhaps not realizing the links between absenteeism and negative, downstream consequences.

"Look, the patterns and routines of going to school were disrupted and to some degree eroded during the pandemic," Malkus says. "And I don't think we've had a decisive turn back that we need to have, to turn this kind of behavior around, and it's going to stay with students until that culture changes."

How do you do that? Malkus points to some low-cost options — like texting or email campaigns to increase parental involvement and encourage kids to get back in school – but says these, alone, aren't "up to the scale of what we're facing now."

Higher-cost options for schools to consider could include door-knocking campaigns, sending staff on student home-visits and requiring that families of chronically absent students meet in-person with school staff.

The learning study goes one step further: "Elected officials, employers, and community leaders should launch public awareness campaigns and other initiatives to lower student absenteeism." Because, after all, students can't make up for the learning they missed during the pandemic if they don't consistently attend school now.

What both of these studies make clear is there is no one solution that will solve these problems, and success will require further investment, aggressive intervention and patience.

Malkus says, even the high-cost, high-return options will likely only drive down chronic absenteeism by about four percentage points. A big win, he says, "but four percentage points against 26% isn't going to get us where we need to go."

Edited by: Nicole Cohen Visual design and development by: LA Johnson and Aly Hurt

Half of U.S. Health Care Workers Say They've Witnessed Racism Against Patients

Half of U.S. Health Care Workers Say They've Witnessed Racism Against Patients

By Dennis Thompson HealthDay Reporter

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THURSDAY, Feb. 15, 2024 (HealthDay News) -- Nearly half of health care workers nationwide say they’ve seen discrimination against patients while on the job, a new report reveals.

While 47% of health workers said they’ve witnessed discrimination against patients in their facilities, 52% said racism against patients is a major problem, according to the report from the Commonwealth Fund and the African American Research Collaborative (AARC).

“The study shines a light on the discrimination and racism health care workers observe and the implications for negative health outcomes of patients in many communities,” said lead report author Henry Fernandez , CEO of the AARC.

“Understanding this connection at a national level is critical to measuring and addressing discrimination in the health care system to mitigate harm to patients and produce better health outcomes overall,” Fernandez added in a Commonwealth Fund news release.

U.S. Cities With the Most Homelessness

research articles in business ethics

For the report, researchers surveyed more than 3,000 health care workers across the United States.

Here's what they found:

More than half of health care workers (57%) witnessed discrimination against a patient who spoke a language other than English

About half (48%) said medical providers are more accepting of what white patients tell them than Black patients

Around half (47%) said dealing with discrimination at work causes them stress

Health care workers at facilities that help more patients of color were more likely to witness discrimination.

About 70% of workers at facilities with predominantly Black patients and 61% of those at facilities with predominantly Hispanic patients witnessed discrimination, compared to 43% at facilities with mostly white patients.

The survey also found that health care professionals themselves also are subjected to racism.

About 44% of health care workers have observed discrimination against coworkers. When provided examples of workplace discrimination, that percentage rose to two-thirds.

When asked about potential solutions, more than two-thirds of health care workers suggested steps like:

Anonymous reporting of racism or discrimination

Better communication with patients and health care professionals of color

Examination of how non-English-speaking patients are treated

Training that helps better spot and stop discrimination

“If we are going to build truly equitable health care systems, we have to start by listening to voices of those on the front lines,” said report co-author Dr. Laurie Zephyrin , senior vice president for advancing health equity at the Commonwealth Fund.

 “Understanding what health care workers are experiencing, and what they want and need from their employers and colleagues to address discrimination, is critical to successful and sustainable change,” Zephyrin added.

More information

The U.S. Centers for Disease Control and Prevention has more about racism and health .

SOURCE: Commonwealth Fund, news release, Feb. 15, 2024

Copyright © 2024 HealthDay . All rights reserved.

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EU AI Act: first regulation on artificial intelligence

The use of artificial intelligence in the EU will be regulated by the AI Act, the world’s first comprehensive AI law. Find out how it will protect you.

A man faces a computer generated figure with programming language in the background

As part of its digital strategy , the EU wants to regulate artificial intelligence (AI) to ensure better conditions for the development and use of this innovative technology. AI can create many benefits , such as better healthcare; safer and cleaner transport; more efficient manufacturing; and cheaper and more sustainable energy.

In April 2021, the European Commission proposed the first EU regulatory framework for AI. It says that AI systems that can be used in different applications are analysed and classified according to the risk they pose to users. The different risk levels will mean more or less regulation. Once approved, these will be the world’s first rules on AI.

Learn more about what artificial intelligence is and how it is used

What Parliament wants in AI legislation

Parliament’s priority is to make sure that AI systems used in the EU are safe, transparent, traceable, non-discriminatory and environmentally friendly. AI systems should be overseen by people, rather than by automation, to prevent harmful outcomes.

Parliament also wants to establish a technology-neutral, uniform definition for AI that could be applied to future AI systems.

Learn more about Parliament’s work on AI and its vision for AI’s future

AI Act: different rules for different risk levels

The new rules establish obligations for providers and users depending on the level of risk from artificial intelligence. While many AI systems pose minimal risk, they need to be assessed.

Unacceptable risk

Unacceptable risk AI systems are systems considered a threat to people and will be banned. They include:

  • Cognitive behavioural manipulation of people or specific vulnerable groups: for example voice-activated toys that encourage dangerous behaviour in children
  • Social scoring: classifying people based on behaviour, socio-economic status or personal characteristics
  • Biometric identification and categorisation of people
  • Real-time and remote biometric identification systems, such as facial recognition

Some exceptions may be allowed for law enforcement purposes. “Real-time” remote biometric identification systems will be allowed in a limited number of serious cases, while “post” remote biometric identification systems, where identification occurs after a significant delay, will be allowed to prosecute serious crimes and only after court approval.

AI systems that negatively affect safety or fundamental rights will be considered high risk and will be divided into two categories:

1) AI systems that are used in products falling under the EU’s product safety legislation . This includes toys, aviation, cars, medical devices and lifts.

2) AI systems falling into specific areas that will have to be registered in an EU database:

  • Management and operation of critical infrastructure
  • Education and vocational training
  • Employment, worker management and access to self-employment
  • Access to and enjoyment of essential private services and public services and benefits
  • Law enforcement
  • Migration, asylum and border control management
  • Assistance in legal interpretation and application of the law.

All high-risk AI systems will be assessed before being put on the market and also throughout their lifecycle.

General purpose and generative AI

Generative AI, like ChatGPT, would have to comply with transparency requirements:

  • Disclosing that the content was generated by AI
  • Designing the model to prevent it from generating illegal content
  • Publishing summaries of copyrighted data used for training

High-impact general-purpose AI models that might pose systemic risk, such as the more advanced AI model GPT-4, would have to undergo thorough evaluations and any serious incidents would have to be reported to the European Commission.

Limited risk

Limited risk AI systems should comply with minimal transparency requirements that would allow users to make informed decisions. After interacting with the applications, the user can then decide whether they want to continue using it. Users should be made aware when they are interacting with AI. This includes AI systems that generate or manipulate image, audio or video content, for example deepfakes.

On December 9 2023, Parliament reached a provisional agreement with the Council on the AI act . The agreed text will now have to be formally adopted by both Parliament and Council to become EU law. Before all MEPs have their say on the agreement, Parliament’s internal market and civil liberties committees will vote on it.

More on the EU’s digital measures

  • Cryptocurrency dangers and the benefits of EU legislation
  • Fighting cybercrime: new EU cybersecurity laws explained
  • Boosting data sharing in the EU: what are the benefits?
  • EU Digital Markets Act and Digital Services Act
  • Five ways the European Parliament wants to protect online gamers
  • Artificial Intelligence Act

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