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Designing Ethical Organizations: Avoiding the Long-Term Negative Effects of Rewards and Punishments

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Abstract

Ethics researchers advise managers of organizations to link rewards and punishments to ethical and unethical behavior, respectively. We build on prior research maintaining that organizations operate at Kohlberg’s stages of moral reasoning, and explain how the over-reliance on rewards and punishments encourages employees to operate at Kohlberg’s lowest stages of moral reasoning. We advocate designing organizations as ethical communities and relying on different assumptions about employees in order to foster ethical reasoning at higher levels. Characteristics associated with ethical communities are identified and AES Corporation and Semco S/A serve as examples of corporations exhibiting the design characteristics and assumptions of ethical organizations.

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Authors and Affiliations

  1. Xavier University, 3800 Victory Parkway, Cincinnati, OH, 45207, U.S.A

    Melissa S. Baucus

  2. Dean of the College of Business, Utah State University, Logan, UT, 84322-3500, U.S.A

    Caryn L. Beck-Dudley

Authors
  1. Melissa S. Baucus
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  2. Caryn L. Beck-Dudley
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Correspondence to Melissa S. Baucus.

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Baucus, M.S., Beck-Dudley, C.L. Designing Ethical Organizations: Avoiding the Long-Term Negative Effects of Rewards and Punishments. J Bus Ethics 56, 355–370 (2005). https://doi.org/10.1007/s10551-004-1033-8

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