BUSINESS ETHICS AND THE NORMATIVE APPROACH

Until quite recently, business ethics as a field focused on how managers and employees should act to satisfy generally accepted ethical standards (see Rest, Reference Rest1986; Jones, Reference Jones1991). This approach can be described as one where the ‘ocused’ and ‘should’ are dominant in people’s thinking about ethical behavior and is referred to as the prescriptive approach (Trevican be described as one where the ‘ocused’ and ‘should’ are dominant in people’s thinking about ethical if people are told how they should act in terms of ethical standards, they consciously will adjust their behavior accordingly. This perspective is based on ideas developed in philosophical traditions and includes prescriptions about comportment toward self, others, and the environment, and also prescriptions about decision making, both in substance as well as procedural. Prescriptive business ethics draws on theories about the nature of what is ‘good’ (ontology) and how we can know what ‘good’ is in specific situations (epistemology). Hence discussions between prescriptive business ethicists are most productive when they happen within a specific paradigm. Utilitarianism, deontology, and virtue ethics are the main paradigms within which prescriptive business ethics is developed. Utilitarianism judges the ethicality of an act by looking at the consequences of that act. It is based on the notion of cause-effect and the binary abstraction of human strivings for pleasure over pain. The good is thus what causes more pleasure than pain for stakeholders. Deontology does not consider consequences. Instead, the ethicality of an act is judged by whether or not the act itself is good. It is based on the notion that humans can act on free will. This is not a whimsical will. Rather, free will is a will freed from ‘the passions’ and directed by reason only. The good is thus an act which a free will is able to will as an act. The deliberation of that ability consists of versions of Kant’s three tests: universalizability, respect for humans as willing beings, and conceptual tenability. Virtue ethics considers an act in order to pass judgment on the actor. The good is a matter of living a ‘good life,’ i.e., acting as a virtuous person and being seen as such. It is based on the notion of the human telos – the potential flourishing as human beings – which we can only achieve by acting as a virtuous person would. Generally, a virtuous person achieves the right balance between too little and too much of a virtue, e.g., confidence as the virtuous middle between anxiety and hubris.

We find it important to note that each of these has its own historicity, meaning that these strands of ethical theory were developed as an attempt to solve pressing societal problems of their time. Jeremy Bentham and John Stuart Mill developed utilitarianism in the context of social reforms demanding government policies that would improve the life of the poor instead of that of the aristocracy. Immanuel Kant developed his thinking in an attempt to give ethics a non-religious foundation in a time when Europe was ravaged by religious wars. Enlightenment thinkers such as Kant-based science, politics and ethics on human reason. It would also be incorrect to state that these people did not have an impact, or that those building further within these paradigms fail to have an impact today. John Rawls’ neo-Kantian seminal work Theory of Justice (1971) develops distributive prescriptions from a hypothetical situation in which people decide on how to distribute goods and benefits within society, from behind a ‘veil of ignorance’ where we have no knowledge of where on the social ladder we will live nor of our gender or (dis)abilities. What Rawls (Reference Rawls1971) wants to point out is that there is a rational way to organize society in a just way but this rationality implies we can make abstraction of any concrete personal situation. Hence, to make a just decision we must take the ‘view from nowhere.’

Another neo-Kantian approach, procedural ethics, became popular through the work of Jürgen Habermas’ discourse ethics (Habermas, Reference Habermas1991). Instead of postulating the foundation of ethics in our individual human reasoning abilities, Habermas sought to formulate such a foundation in the consensus people reach through dialogue. Habermas’ moral philosophy is thus an exploration of what constitutes a dialogue between humans which can lead to an agreed decision. The answer is the ‘domination-free dialogue’ (herrschaftsfreie Dialog) or the ideal speech community. It is an ideal-typical situation where all those affected can speak without fear and while being fully informed. Habermas thus formulates prescriptive statements with regard to how a decision must be reached, because it is the procedure through which a decision is made that justifies the content of that decision. The work of Habermas is also used to develop frameworks to understand business organizations as political actors (Scherer & Palazzo, Reference Scherer and Palazzo2007).

For the purpose of this paper, the important aspect of the prescriptive approach is that it advocates a view point that if people know how they should act, they will be consciously aware of these moral demands and hence display behaviors in line with these ‘oughts’ and ‘shoulds’ (Rest, Reference Rest1986; Reynolds, Reference Reynolds2008). A prescriptive approach thus implies that people are rational human beings, who make conscious decisions about how to act. As a result, prescriptive approaches to business ethics assume that bad people do generally bad things and good people do good things, because they are rational decision makers. Explaining situations whilst sticking to this rational way of reasoning is attractive for a variety of reasons (De Cremer, Reference De Cremer2009, De Cremer & Tenbrunsel, Reference De Cremer and Tenbrunsel2012): (a) it is a simple assumption that promotes an economic way of thinking about moral violations, (b) allows to blame a few ‘bad’ apples for the emerging violations, and (c) provides a justified ground to punish those regarded as rationally responsible. However, many situations exist where good people do bad things – an observation that has received considerable empirical support (Bersoff, Reference Bersoff1999; Chugh, Bazerman & Banaji, 2005; Gino, Schweitzer, & Mead, Reference Gino, Schweitzer and Mead2011; Shalvi, Dana, & Handgraaf, Reference Shalvi, Dana and Handgraaf2011; Umphress & Bingham, Reference Umphress and Bingham2011). These observations challenge the accuracy of the prescriptive approach in predicting the extent to which so-called rational human beings will display ethical behavior. It seems to be the case that because of rather irrational, psychological tendencies humans do not always recognize the moral dilemma at hand and engage in unethical behaviors without being aware of it.

To make sense of the fact that good people can do bad things an alternative view point is needed that accounts for people’s morally irrational behavior. We propose that this alternative view point is a descriptive approach that examines more closely how people actually take decisions and why they sometimes do not act in line with the moral principles that are universally endorsed. This approach is in line with Treviño, Weaver, and Reynolds (Reference Treviño, Weaver and Reynolds2006: 952) definition of behavioral ethics, which ‘refers to individual behavior that is subject to or judged according to generally accepted moral norms of behavior.’ Important to realize is that such a behavioral approach includes the assumption that people do not always deliberately cheat or engage in unethical actions because many of our moral judgments and interpretations have to be considered as consequences of automatic and intuitive affective reactions. Haidt (Reference Haidt2001: 818), for instance, defined moral intuition as ‘the sudden appearance in consciousness of a moral judgment, including an affective valence (good-bad, like-dislike), without any conscious awareness of having gone through steps of searching, weighing evidence, or inferring a conclusion.’ Put simply, our moral evaluations and decisions are not only guided by conscious rational thought processes but also by quick and affect-laden processes (e.g., Ruedy, Moore, & Gino, Reference Ruedy, Moore and Gino2013).

Business ethics approaches thus have to take into account moral intuition to understand why managers, employees and even organizations can so easily deviate from morally accepted standards in their actions and decisions. A famous example of illustrating the role that intuitions and emotions play in making moral judgments concerns the trolley problem as discussed by philosophers (Foot, Reference Foot1967; Thomson, Reference Thomson1985; Otsuka, Reference Otsuka2008) and examined extensively recently by neuroscientists (Greene, Reference Greene2013). The trolley dilemma introduces a problem where there is an out-of-control trolley car about to strike a group of five people standing on the tracks ahead. Two different versions of the dilemma exist. In the first version (referred to as the switch dilemma), people can divert the trolley by using a switch onto another track where there is only one person standing. If they do this, only one person will die and five will live. Studies show that the majority of people decide to divert the trolley to the other track. This result initially was interpreted to favor a rational perspective on morality. That is, people simply count the number of people that would die (1) versus survive (5). In the second version of the dilemma (referred to as the footbridge dilemma) the trolley is also out of control, but this time there is no other track to divert the trolley on. There is only one track and people are standing on a bridge across the track. Standing next to them is a large stranger. This person is large enough to stop the trolley. The respondents themselves are not large enough to do this. So, the question in this version of the dilemma is whether people will push the large stranger off the bridge to derail the trolley. In this version, almost none of the respondents will do this. Although the philosophical tradition of utilitarianism would dictate us to simply count in both versions of the dilemma, people do deviate from this rational approach in the footbridge dilemma. The reason for this is that by pushing a person from the footbridge people are asked to explicitly and directly harm someone and because of this association our emotions will come into play and make us act less rational (Greene, Sommerville, Nystrom, Darley, & Cohen, Reference Greene, Sommerville, Nystrom, Darley and Cohen2001; Haidt, Reference Haidt2007).

Interestingly, this relationship between doing harm to others and intuition was also the main theme of the moral philosophical work of Emmanuel Levinas (Levinas, Reference Levinas1969, Reference Levinas2003; Burggraeve, Reference Burggraeve1999). It is the encounter with another person that lays a moral claim on me. Levinas terms this the face-to-face with the Other – he uses capital ‘O’ to emphasize the radical otherness of the other, i.e., irreducible to the ‘same as me.’ For Levinas, moral claims entail an endless responsibility toward the other. There exists no calculation and no principled reasoning that releases me from my responsibilities to the other. In that sense, the work of Levinas is radically different from the rational approaches in ethical theory we mentioned at the outset of this paper: utilitarianism, deontology, and justice. Levinas’ work provides us with a philosophical account of why ethical intuition persistently overrides rational ‘solutions.’ It is the physical presence of another person that makes us perceive a situation as quite different, something rational ethical theories are not able to take account of. The work of Levinas is a reaction to the Nazi atrocities of the Second World War, and in this sense can be seen as part of philosophical grapplings with how organization and ideology blunts ethical reasoning. Arendt’s (Reference Arendt1963) work on the ‘banality of evil’ and Lyotard’s (Reference Lyotard1984) critique of grand narratives are other examples. These influenced Bauman’s (Reference Bauman1991) work on ‘moral distance’ to which we turn further in this paper.

Taken together, the assumption that when people are confronted with moral dilemmas they are automatically aware of what they should be doing and therefore are in control to do the good thing is limited in its predictive value because of the fact that humans seem to deviate from what rational approaches predict. In this paper we therefore make the point that conditions exist where our human rationality fails and we are to some extent blind to our own ethical transgressions. For this reason, if we are serious about designing more effective interventions to prevent the emergence of unethical behaviors we also need to increase our understanding of why and how rational approaches to ethics fail and why there is an irrational element present in our ethical decision-making processes. In our view prescriptive business ethics and behavioral business ethics are complementary in helping us to understand such questions.

BEHAVIORAL BUSINESS ETHICS: AN EMERGING NEW FIELD

Knowing that unethical behavior needs to be accounted for does not directly imply that people are able all the time to control impulses that undermine our conscious control over our bad and good actions. Therefore, the bad behaviors that we have seen committed by corporate leaders in the last two decades cannot simply be seen in light of their ‘bad’ and ‘unethical’ personal character. How can we explain this?

An interesting idea put forward by the behavioral business ethics approach is that many organizational ethical failures are not only caused by the so-called bad apples. In fact, closer inspection may reveal that many ethical failures are in fact committed by people generally considered to be good apples (Bazerman & Banaji, Reference Bazerman and Banaji2004), but depending on the barrel they are in they may be derail from the ethical path (Kish-Gephart, Harrison, & Treviño, Reference Kish-Gephart, Harrison and Treviño2010). As such, it may well be that all of us may commit unethical behaviors, given the right circumstances and therefore we need to zoom in more on how individuals process morality information and its flaws and how they do this in the larger social setting. The role of behavioral ethics in addressing ethical failures is to introduce a psychological-driven approach that examines the role of cognitive, affective and motivational processes to explain the ‘how,’ ‘when,’ and ‘why’ of individual’s engagement in unethical behavior. Noteworthy, this approach will allow us to identify deviations from actions and decisions based on a rational type of predictions, explain why these deviations occur, and design more effective preventions and interventions (De Cremer, Tenbrunsel, & van Dijke, Reference De Cremer, Tenbrunsel and van Dijke2010; De Cremer, van Dick, Tenbrunsel, Pillutla, & Murnighan, Reference De Cremer, van Dick, Tenbrunsel, Pillutla and Murnighan2011).

In the following section, we discuss two topics that have received considerable attention the last few years by behavioral ethics researchers. These two topics illustrate how psychological processes play a role in shaping people’s moral judgments and actions that are relevant to business and organizations: (a) the processes and biases taking place during ethical decision making and (b) the impact of the social situation on how ethical judgments and actions are framed and evaluated.

ETHICAL DECISION MAKING

Before an actual decision is made in the moral domain, people need to realize that their decision may reveal ethical consequences to both themselves and interdependent others. Only then, decisions that are violating existing and shared moral principles can be recognized early on in the decision-making process and hence be interrupted in a timely fashion to prevent further ethical escalations. Or, as Jones (Reference Jones1991) puts it, ‘for the moral decision-making process to begin, a person must recognize the moral issue’ (p. 380). As mentioned earlier, this key aspect in the conscious decision-making process is only a given if humans only make rational decisions. However, the behavioral ethics approach clearly postulates that we are not solely driven in our actions by reason and that often emotions exert significant influence. As a result, our decisions with respect to moral dilemmas are bounded in rationality, which led Banaji and colleagues (Banaji & Bhaskar, Reference Banaji and Bhaskar2000; Banaji, Bazerman, & Chugh, Reference Banaji, Bazerman and Chugh2003; Chugh, Bazerman, & Banaji, Reference Chugh, Bazerman and Banaji2005) to refer to this issue as ‘bounded ethicality.’ Bounded ethicality includes the workings of our human psychological biases that facilitate the emergence of unethical behaviors that do not correspond to our normative beliefs. Specifically, people develop or adhere to cognitions (biases, beliefs) that allow them to legitimize doubtful, untrustworthy and unethical actions. Importantly, these cognitive biases operate outside our own awareness and therefore in a way make us blind to the ethical failures we commit (Reynolds, Leavitt, & DeCelles, Reference Reynolds, Leavitt and DeCelles2010). In addition, this blindness is further rooted in the self-favoring belief that in comparison to the average person one can be looked upon as fairer and more honest (e.g., Taylor, Reference Taylor1989; Epley & Dunning, Reference Epley and Dunning2000; Hilbig & Hessler, Reference Hilbig and Hessler2013). These self-favoring interpretations of who they are in terms of morality, are used by humans in implicit ways to infer that they will not act unethically, which as a result lowers their threshold of monitoring and noticing actual violations of our ethical standards (Banaji, Bazerman, & Chugh, Reference Banaji, Bazerman and Chugh2003).

The concept of bounded ethicality thus literally includes a blindness component, which can be seen as activating an ethical fading process, which as Tenbrunsel (Reference Tenbrunsel2005: 96) notes is ‘a process that removes the difficult moral issues from a given problem or situation, hence increasing unethical behavior.’ Below, we briefly discuss a number of psychological processes that influence people to show unethical behavior even if it contradicts their own personal beliefs about ethics. These processes are: moral disengagement, framing, anchoring effects, escalation effects, level construal, and should-want self.

THE IMPACT OF THE SITUATION

The above makes clear that psychological processes significantly influence people’s perceptions, interpretations and ultimately their behaviors. At the same time, these studies and the fact that scholars find them salient, show that people are aware of what would constitute ethical behavior, or at least people are still trying to be rational or give reasons for how they behave, but are unaware of the extent in which they fail to be rational. Hence, prescriptive ethics is not a cognitive fantasy of moral philosophers. This observation therefore strongly suggests that behavioral ethics researchers need to devote attention to the automatic and egocentric biases or heuristics that influences individual’s behavior. Of course, such a focus is only concerned with the cognitive, motivational and affective processes that take place within the individual (i.e., an intra-individual approach). As we know from social psychology (Snyder & Cantor, Reference Snyder and Cantor1998), human behavior, however, is not only influenced by what one feels, thinks and wants, but also by the situation one is interacting in (see also Treviño, Reference Treviño1986). This is an important point to make because people underestimate the impact of the situation; a tendency referred to as the fundamental attribution error (Ross, Reference Ross1977). This bias describes the tendency to over-value dispositional or personality-based explanations for the observed behaviors of others while under-valuing situational explanations for those behaviors. In social psychology several famous studies have been conducted to illustrate the impact of social context on people’s behavior, and show relevance to the emergence of evil and bad behavior (Asch, Reference Asch1955; Milgram, Reference Milgram1974; Zimbardo, Reference Zimbardo2007).

The Asch (Reference Asch1955) experiments on social influence and conformity illustrated in a persuasive manner that social conditions exists that make individuals comply with group pressures considering what a correct response is even when the opinion of the group is clearly contrary to fact. To test this idea Asch put a group of eight individuals (one participant and seven confederates) together in a room and verbally stated which of three unequal lines matched a given line. The participant was seated so that he made his judgment last. Results showed evidence for the ‘majority effect’ in such a way that participants deviated from their own personal judgment (which was correct) if the majority of the group opted for another response. These findings suggest that people can easily deviate from what is considered good behavior if enough others show bad behavior.

The famous experiments by Milgram (Reference Milgram1974) into obedience to authority have had a significant impact on how social influence can shape bad behavior. As discussed earlier in the present paper, his findings were important as they demonstrated that people can be easily pressured into complying with evil requests from their supervisors. Despite the fact that most participants blamed the experimenter to avoid personal responsibility, the findings are clear in showing that people do not stand up to authorities that easily and thus are subject to normative and social influences more than they would predict themselves.

Finally, in 1971 Zimbardo (Reference Zimbardo2007) conducted an impressive experiment at the Stanford University campus in which participants assumed the roles of ‘prisoner’ or ‘guard’ within an experimentally devised mock prison setting. After a while it was clear that many of the participants classified as ‘prisoners’ were in serious distress and many of the ones classified as ‘guards’ were behaving in ways which brutalized and degraded their fellow participants. Participants were so merged into the prisoner’s setting that they took up their roles too seriously, leading to behavior that was considered inappropriate and unethical at times. In a similar vein, De Cremer and colleagues (De Cremer, Reference De Cremer2003; De Cremer & van Dijk, Reference De Cremer and van Dijk2005, Reference De Cremer and van Dijk2008; Stouten, De Cremer, & Van Dijk, Reference Stouten, De Cremer and van Dijk2005; Van Dijk & De Cremer, Reference Van Dijk and De Cremer2006) demonstrated in a series of experimental studies that providing people with the label of leader makes them more self-serving in a way that they allocate more tangible resources to themselves. In addition, this self-serving behavior goes together with a belief that leader labels make people feel that they are actually entitled to more rewards than when they are provided the label of follower. This is precisely the bias the Rawlsian ‘veil of ignorance’ we mentioned earlier aims at avoiding.

The social context in which we make ethical-related decisions can exert a significant influence and derail us from the good behavior we are expected to show. This idea of context being a powerful determinant for people to act in bad and unethical ways towards others has been central in the work of Bauman on ‘moral distance’ (Bauman, Reference Bauman1991). The notion of moral distance holds the idea that people will have only ethical concerns about others that are near to them. If the distance increases, it becomes easier to behave in unethical ways. Interestingly, the work of Bauman was heavily influenced by the earlier mentioned study of Milgram (Reference Milgram1974) on obedience to authority. One could say that in the Milgram study the fact that the participants were sitting in a different room and did not see the confederate who was supposedly receiving the electro shocks made it easier for them to increase the level of shocks to a deadly level.

If context is essential in activating the effects associated with the notion of moral distance, a specific question to address is how we can understand how specific organizational settings influence people’s decisions to show good behavior or not. In light of this question, Tenbrunsel, Smith-Crowe, and Umphress’s (Reference Tenbrunsel, Smith-Crowe and Umphress2003) approach to study the impact of the situation on people’s unethical behavior and decision making by looking at organizational elements is promising. These authors put forward the idea that organizational settings carry so many specific features with it and each of these features may frame the organizational setting in ways that either prevent or facilitate unethical behavior and decision making (De Cremer, Reference De Cremer2010a).

A first organizational feature is the kind of industry people may work in. For example, the LIBOR scandal where traders manipulated the interest rate known as Libor illustrates that a context defined in terms of finance actually encouraged dishonest behavior. Indeed, when ex-trader Tom Hayes was sentenced to 14 years in prison for his taking part in the Libor scandal, he noted in his voluntarily testimony that the practices he engaged in were widespread and blatant in the industry. This claim has been backed up by recent behavioral ethics research showing that mere exposure to money – an organizational feature much present in the financial sector – leads to more unethical behavior (Kouchaki, Smith-Crowe, Brief, & Sousa, Reference Kouchaki, Smith-Crowe, Brief and Sousa2013). The reason for this causal relationship is that the mere exposure to money makes people adopt a business decision frame in which decisions are more calculative. In addition, other recent research has further demonstrated that people with a calculative mind set act in more selfish and unethical ways (Wang, Zhong, & Murnighan, Reference Wang, Zhong and Murnighan2014).

Another organizational feature is the structure of the organization that creates more versus less distance toward others, which can influence the degree of unethical behaviors. Two types of organizational structures that are relevant to this issue are mechanistic and organic structures (Slevin & Covin, Reference Slevin and Covin1997). Mechanistic structures in organizations represent rigid and bureaucratic decision-making structures that foster more hierarchical and distant relationships and communications. Organic structures, on the other hand, represent organizations that are flexible and use more decentralized structures in which it is easier to communicate and relationships are experienced as more close (Lawrence & Lorsch, Reference Lawrence and Lorsch1967; Khandwalla, Reference Khandwalla1977). Based on the idea of Bauman (Reference Bauman1991: 26) that bureaucracy functions as a ‘moral sleeping pill,’ it stands to reason that mechanistic organization structures introduce more distance and hence allow for more unethical behaviors to emerge.

A final important organizational element that influences significantly the level of compliance among its employees is the perceived degree of fairness in which procedures are used to allocated organizational resources, or, also referred to as procedural justice (Thibaut & Walker, Reference Thibaut and Walker1975; Lind & Tyler, Reference Lind and Tyler1988). When the decision-making authorities, acting as representatives of the organization, make use of fair procedures it makes that organizational members perceive the organization is a neutral and ethical collective. Tyler, Dienhart, and Thomas (Reference Tyler, Dienhart and Thomas2008), in fact, provided evidence that if organizational leaders enact fair procedures (e.g., giving voice, being accurate and unbiased in processing information, etc.; Leventhal, Reference Leventhal1980) employees infer the idea that the organization considers the value of morality as an important one. This perception of a moral organization is essential to attract the right kind of employees pursuing the same moral standards and promotes the emergence of moral congruence between the organization and its employees, which furthers ethical and prosocial behavior (Tyler & De Cremer, Reference Tyler and De Cremer2009). Importantly, however, is that procedural justice not only builds ethical climates that are shared and supported by all organizational members, but it also helps to integrate punishment systems into those ethical climates. The reason for this is that the enactment of fair procedures promotes perceptions of legitimacy and trustworthiness (Tyler, Reference Tyler1997), and as a result punishment and control systems will be endorsed and complied with as means to promote and uphold the shared moral standards (De Cremer & van Knippenberg, Reference De Cremer and van Knippenberg2003; De Cremer, Hoogervorst, & Desmet, Reference De Cremer, Hoogervorst and Desmet2012).

This focus on organizational elements that significantly impact the emergence of ethical versus unethical behaviors indicates that an important task for organizations is to devote attention to the design of the moral nature of their work climates. One step toward doing this is thus to create procedurally just climates (Tenbrunsel, Smith-Crowe, & Umphress, Reference Tenbrunsel, Smith-Crowe and Umphress2003). Another way of doing this is to ensure the presence of a more general organizational ethical climate. Victor and Cullen (Reference Victor and Cullen1987: 51), define ethical climate as ‘the shared perception of what is correct behavior and how ethical situations should be handled in an organization.’ In such a climate, it is clear for employees which values the organization appreciates and actively pursues and which kind of behaviors will not be tolerated and thus corrected. A focus on designing and shaping the ethical infrastructure of the organizational climate is therefore an important responsibility of leaders at different levels within the organization (Tenbrunsel, Smith-Crowe, & Umphress, Reference Tenbrunsel, Smith-Crowe and Umphress2003; Arnaud & Schminke, Reference Arnaud and Schminke2012). For example, ethical climates can lead to the validity and legitimacy of law and professional codes (Erondu, Sharland, & Okpara, Reference Erondu, Sharland and Okpara2004). Furthermore, ethical climates also promote ethics related individual outcome variables such as the development of ethical judgments, expressions of ethical intentions and fair and moral decision making (Barnett & Vaicys, Reference Barnett and Vaicys2000; Fritzsche, Reference Fritzsche2000; Buchan, Reference Buchan2005).

THE FUTURE OF BEHAVIORAL ETHICS: WHAT TO DO NEXT?

In the present article, we described the usefulness and importance of a behavioral approach when studying issues relevant to understanding the workings of business ethics in organizations. It is vital for organizations and business to perform well and evidence is mounting that this can go hand in hand with good and moral behavior. So, in a way ‘good’ companies can also do well at the performance level and as such can contribute to the sustainability of the organization. A behavioral approach helps us to understand why people act the way they do and why they do it. We hasten to say, however, that it is of course also important to stress that as a new field behavioral business ethics still faces many challenges. These challenges are, in our view, situated in four areas that are important with respect to (a) understanding further the psychological underpinnings of ethical judgments and decision making, (b) creating a better understanding of the means on how to shape more ethical behavior when such behavioral constraints are available, (c) deepening our insights into how to remedy unethical failures, particularly in light of the idea that all of us can fail at any given moment, and (d) critically analyzing and discussing the further development of the field of business ethics.

Below, we will discuss these challenges by pointing out the (1) importance of the ratio-emotion distinction (related to challenge (a)), (2) role of leadership in shaping ethical work climates and motivations (related to challenge (b)), (3) way we need to respond to build trust again after unethical failures (related to challenge (c)), and (4) relevance of integrating the descriptive and prescriptive approaches (related to challenge (d)).

The first challenge deals with examining further the psychological antecedents of human decision making and ethics. Specifically, it is important that in addition to looking at cognitive factors that we also focus more closely on the role of emotions and motivations. However, we also agree with Reynolds and Ceranic’s (Reference Reynolds and Ceranic2007) recommendation that ‘while we may have perhaps overrelied on cognition in the past, we did so for good reason. As the field moves towards other areas … it is wise to integrate into those new areas what research based on the cognitive perspective has already established’ (p. 1622).

On a related note, future research would do well to elaborate further on the distinction between affect-intuition and ratio. Although we sometimes know how to judge consciously an event in moral terms, it often is the case that we know intuitively what is right and wrong without too much cognitive processing. The use of dual-process models (Chaiken & Trope, Reference Chaiken and Trope1999) is therefore a necessity in the development of the field of behavioral business ethics. The introduction of such a model is arguably not new as concerns about the complex relation between reason, emotion, and intuition goes way back to the Stoics and is prominent in Spinoza’s ethics as well as the writings of early Enlightenment thinkers such as Hume (1777/Reference Hume1969), who suggested that emotions guide moral cognitions, and Kant (1785/Reference Kant1959), who considered reason the primary determinant of moral judgments. Therefore, we do not only need to develop a research agenda in which both ratio and emotion/intuition have their place, but also focus on when exactly which process is dominating, and, maybe even more importantly, how ratio and intuition interact in arriving at morality judgments.

The second challenge concerns the development of the concept ethical leadership. Particularly in the wake of the financial crisis, the demand for leaders leading with integrity and morality is at its peak (Stouten, Van Dijke, Mayer, De Cremer, & Eeuwema, Reference Stouten, Van Dijke, Mayer, De Cremer and Eeuwema2013). Brown, Treviño, and Harrison (Reference Brown, Treviño and Harrison2005) define 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). Ethical leadership is thus believed to reveal more trustworthy, fair and cooperative working environments and intrinsically motivate employees to do what is morally justified for both the company and society at large (Mayer, Kuenzi, Greenbaum, Bardes, & Salvador, Reference Mayer, Kuezni, Greenbaum, Bardes and Salvador2009; Walumbwa & Schaubroeck, Reference Walumbwa and Schaubroeck2009). Although the existing research paints a positive image of the effects that ethical leadership reveal, in our opinion, several shortcomings concerning the concept still need to be taken care of.

First, both the definition and operationalization of the ethical leadership concept entails a variety of leader behaviors that make up for the complete leader, but that fail to clarify accurately what makes this complete leader ethical. Specifically, ethical leaders are considered, fair, trustworthy, able to punish or reward, to show integrity and respect, to motivate and be the example to follow, making that so many components are involved that it is hard to see how research on ethical leadership is different from other established research themes in the organizational field. Therefore, it is necessary that an integration is pursued between those different research themes and that more insights are provided about which components matter more versus less in promoting the perceived morality of the leader.

Second, the definition of ethical leadership solely focuses on how the leader him/herself can set the example to be a moral employee, whereas it is also argued that ethical leaders should transmit ethical norms and standards across different layers within the organization (Schaubroeck et al., Reference Schaubroeck, Hannah, Avolio, Kozlowski, Lord, Treviño, Dimotakis and Peng2012). In this view, leadership is simply restricted to the one leading. More recent leadership studies and reviews have argued to adopt a follower-centered approach of leadership as the congruency in values, attitudes and motives between leaders and followers ultimately leads to an increase in leader effectiveness (Boas, Pillai, Bligh, & Uhl-Bien, Reference Boas, Pillai, Bligh and Uhl-Bien2006). For example, across a series of experimental and field studies, De Cremer, Mayer, Van Dijke, Schouten, and Bardes (Reference De Cremer, Mayer, Van Dijke, Schouten and Bardes2009) showed that self-sacrificial leadership (an ethical leadership style focused on promoting the interest of the collective even at the expense of the leader’s own interests) is most effective in promoting prosocial behaviors among followers who are motivated to pursue safety and maintenance of the social welfare. Thus, how congruent the leader behavior and identity is with the followers’ values significantly influences how effective ethical leaders can be (cf. Mayer, Aquino, Greenbaum, & Kuenzi, Reference Mayer, Aquino, Greenbaum and Kuenzi2012).

The third challenge deals with how people respond once unethical events have emerged. Although many organizations attempt to prevent the emergence of unethical decisions and actions, it is clear that these events will nevertheless occur. Hence there is a need to study the extent to which self-interest versus morality plays a role in addressing unethical outcomes. That is, unethical events can happen to one personally or one may observe how another person is treated badly. An important question is whether people will do something about the unethical event out of self-interested or moral concerns (cf. Turrillo et al., 2002). This question is an important one from the perspective of organizations. As many tasks are conducted within teams and groups we need to know whether people will report wrongdoing when others are the victim of irresponsible and unethical acts. If this is the case then it is easier to build moral communities within organizations that are intrinsically motivated to maintain high moral standards at the work floor.

There is also a need to study how to remedy ethical failures. How to deal with violations of morally accepted rules and standards in a way that trust (and by consequence ethical beliefs) is maintained? Indeed, when accepted moral standards are violated, trust will suffer. Trust is defined as a psychological state in which people have confidence that others will act out of goodwill and take the interests of others into account (Mayer, Davis, & Schoorman, Reference Mayer, Davis and Schoorman1995; De Cremer, Snyder, & Dewitte, Reference De Cremer, Snyder and Dewitte2001). Unfortunately, to date, very little attention has been devoted to this issue of restoring trust after ethical failures. This is regretful because when ethical failures emerge, it is communicated that integrity is suffering and that acting out of goodwill is a problem. For this reason, a lack of ethics may erode trust (De Cremer, Reference De Cremer2010c; De Cremer, van Dijk, & Pillutla, Reference De Cremer, van Dijk and Pillutla2010; Desmet, De Cremer, & van Dijk, Reference Desmet, De Cremer and van Dijk2011). Hence, in circumstances of ethical failures the stakes are high because trust is an important antecedent of organizational performance (De Cremer, Snyder & Dewitte, Reference De Cremer, Snyder and Dewitte2001). Companies that manage ethical failures well tend to preserve or even promote a trustworthy reputation (Pillutla, Murnighan, & De Cremer, Reference Pillutla, Murnighan and De Cremer2009). The fourth challenge concerns the suggestion that, although the present article advocates the use of a descriptive approach in studying issues of ethics and morality in organizations and business, we do not wish to make the claim that we have to leave prescriptive approaches behind or consider it as a field with limited value. Contrary, we wish to point out that to further our understanding with respect to the why and how of (un)ethical behavior requires an integration between the prescriptive and descriptive approaches. As Warren and Smith-Crowe (Reference Warren and Smith-Crowe2008) wrote: ‘while behavioral ethics is descriptive rather than prescriptive, good social science requires a thorough understanding and definition of one’s construct – researchers only want to predict and describe ethical behavior, but in doing so, they must define what is ethical, and, therefore, they must be in some sense prescriptive’ (p. 84). Brief (Reference Brief2012) notes that too little consideration to what constitutes right and wrong has left the field of descriptive business ethics occupied with the obviously wrong. By drawing on the prescriptive ethics literature behavioral business ethics can move beyond the extremes of scandal and explore a hinterland of ethically more complex phenomena. An example can be found in Harbour and Kisfalvi (Reference Harbour and Kisfalvi2014) who build on virtue ethics literature to examine empirically what constitutes courage in an organizational context. The work of moral philosophers is used to develop conceptual boundaries of the courage construct, rather than mere references in passing. Indeed we need to be able to define what an ethical decision implies in terms of its meaning and content, or else behavioral business ethics runs the risk of talking about anything and nothing at the same time (De Cremer & Tenbrunsel, Reference De Cremer and Tenbrunsel2012) and become a ‘field without meaning’ (Tenbrunsel & Smith-Crowe, Reference Tenbrunsel and Smith-Crowe2008: 551). On the one hand, the descriptive approach needs the prescriptive one to give it a sense of direction. For example, we discussed the importance of ethical climates in organizations. The descriptive work on organizational justice shows that people are not only concerned about justice being done to them but also to others. Hence, an important task for organizations is to create procedurally just climates that affect employees’ perceptions and expectations that others in the organization act in moral and ethical ways (Tenbrunsel, Smith-Crowe & Umphress, Reference Tenbrunsel, Smith-Crowe and Umphress2003; De Cremer, van Dijke, & Mayer, Reference De Cremer, van Dijke and Mayer2010). A prescriptive approach such as Habermas’ dialogue ethics can be informative as to how to start building exactly such just procedures (Unerman & Bennett, Reference Unerman and Bennett2004).

On the other hand, the prescriptive approach needs the descriptive one. It is the latter that is the content of the former. All ethical theories stem from an attempt to theorize ethical ‘intuition’: what is it about a situation that makes it (un)ethical, how can we know what is ethical. For example, Kant developed his theory in an attempt to circumvent a religious foundation for the human knowledge of what is good because he was disgusted with religious wars that had caused so much suffering in Europe. Rawls sought to defend the notion that the state would secure its citizens’ well-being without imposing on those citizens how they should define their well-being. An example closer to the business ethics field can be found in the prescriptive literature on whistleblowing. In the 1990s Miceli, Near and Dworkin conducted extensive descriptive research on whistleblowers (for an overview see Miceli, Near, & Dworkin, Reference Miceli, Near and Dworkin2008). This work has caused a huge shift in how prescriptive business ethics discusses whistleblowing. For example, Vandekerckhove and Commers (Reference Vandekerckhove and Commers2004) use the descriptive research to argue how the debate around loyalty was a mistaken one. Also, descriptive ethics research is used to provide complexity to normative prima facie positions on whether whistleblowing is a right or a duty, and what the implications are for implementing such policies (Tsahuridu & Vandekerckhove, Reference Tsahuridu and Vandekerckhove2008; Vandekerckhove & Tsahuridu, Reference Vandekerckhove and Tsahuridu2010). Over a time span of only two decades, descriptive ethics research has shifted normative discussions around whistleblowing from a focus on the whistleblower to a focus on the recipient of whistleblowing (Brown, Vandekerckhove, & Dreyfus, Reference Brown, Vandekerckhove and Dreyfus2014; Vandekerckhove, Brown, & Tsahuridu, Reference Vandekerckhove, Brown and Tsahuridu2014).

IN CONCLUSION

The aim of this paper was to recast prescriptive and descriptive business ethics in light of one another. Although much progress has been made in understanding why people care about ethics and morality and the resulting use of moral values and codes of conduct in creating ethical climates in organizations, the present paper argued that in addition to more prescriptive approaches we also need descriptive approaches that zoom in on the psychological underpinnings of why good people can do bad things. Improving our insights into why people show good and bad behavior will enable us to prevent or (if prevention is not possible) manage ethical failures and promote towards the future. We hope that this message will motivate organizational researchers to take up the challenge to develop more comprehensive theoretical models of (un)ethical behavior that are both informed by moral philosophy as well as have clear practical implications to improve organizational functioning and sustainability.