From 2018... Although society and the law often treat individuals and organizations as equivalent, people believe for-profit organizations’ behaviors are less ethical than identical individual behaviors

Organizations Appear More Unethical than Individuals. Arthur S. Jago, Jeffrey Pfeffer. Journal of Business Ethics, November 2019, Volume 160, Issue 1, pp 71–87, February 12 2018. https://link.springer.com/article/10.1007/s10551-018-3811-8

Abstract: Both individuals and organizations can (and do) engage in unethical behaviors. Across six experiments, we examine how people’s ethical judgments are affected by whether the agent engaging in unethical action is a person or an organization. People believe organizations are more unethical than individuals, even when both agents engage in identical behaviors (Experiments 1–2). Using both mediation (Experiments 3a–3b) and moderation (Experiment 4) analytical approaches, we find that this effect is explained by people’s beliefs that organizations produce more harm when behaving unethically, even when they do not, as well as people’s perceptions that organizations are relatively more blameworthy agents. We then explore how these judgments manifest across different kinds of organizations (Experiment 5) as well as how they produce discrepant punishments following ethically questionable business activities (Experiment 6). Although society and the law often treat individuals and organizations as equivalent, people believe for-profit organizations’ behaviors are less ethical than identical individual behaviors. We discuss the ethical implications of this discrepancy, as well as additional implications concerning reputation management, punishment, and signaling in organizational contexts.

Keywords: Corporate personhood Punishment Organizations

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General Discussion

Although organizations are different in many ways from individual people, they may sometimes find themselves in similar ethical situations. In this research, however, we found that people’s judgments of organizational and individual behaviors differ in systematic ways. Across six experiments and a variety of transgressions, we found that people believed organizational behaviors were more unethical than the identical behaviors of individual people. We further found that these judgments resulted, at least in part, because observers believed that organizations created more harm from their behaviors (even when they did not) and were more blameworthy. Moreover, our studies suggested that these results were reasonably robust across different populations and over a range of different countries, although people did distinguish between for-profit companies and other organizational categories (e.g., a family business or a government agency). Finally, we found that differences in ethical judgments, not surprisingly, resulted in different degrees of willingness to punish ethical violations, such that organizations that lodged the agency for an unethical act in an individual may confront fewer and smaller sanctions than organizations that do not deflect blame onto one person. These results suggest that organizations can seek to appear less unethical not only by improving their behaviors, but also by framing individual agents as responsible for those actions. Organizations wield a great deal of economic, social, and political power in modern society. Therefore, understanding how organizations can frame behaviors as more or less ethical is of substantial importance not only to understand communication and impression management processes, but also how the public ultimately reacts—or does not react—to unethical business practices.


Implications

Across six experiments, we identified a descriptive inequality: organizations appear more unethical than individuals when both agents engage in identical behaviors. What are some normative implications of this phenomenon? On the one hand, one interpretation of these experiments is that framing individuals as responsible for organizational transgressions is unethical in practice. Instead of managing impressions or stakeholder relations by engaging in less unethical behavior (or more ethical behavior), organizations may be incentivized—at least to some extent— to instead focus their resources toward scapegoating undesirable behaviors by blaming individual actors as opposed to addressing their root causes or preventing bad behaviors from reoccurring at an institutional level. Indeed, the present experiments highlight one reason why organizations might focus on individual behaviors and apologies following unethical behavior (e.g., Oscar Munoz’s apology for United Airlines’ forcible removal of a passenger) as well as why public relations consultants and researchers tend to encourage organizations to focus on individual communications (see Hearit 1994; Kim et al. 2004; Schweitzer et al. 2015). As such, capitalizing on this phenomenon to improve stakeholder impressions might be unethical, compared to trying to address transgressions in the first place or expending resources to prevent them from reoccurring.

However, another interpretation of these results is that people are evaluating for-profit organizations in a biased way, departing from how they “should” be responding to unethical practices. As we reported in Experiment 5, participants believed that other kinds of organizations (government agency, family business) as well as individual people who exhibited similar levels of unethicality were similar; the only significant differences we found were when we compared these agents with for-profit organizations. Because there were no actual differences in the harm caused in the specific scenarios we utilized, one interpretation of these results is that people tend to depart from rationality in a way that disfavors for-profit organizations. The vast literature concerning people’s judgment and decision making (e.g., Tversky and Kahneman 1974) suggests that—while they can err—heuristics are often useful tools for navigating complex social environments. In the case of responding to for-profit organizations’ behaviors, for example, it is almost certainly the case that large firms tend to cause more harm than individuals when transgressing. In situations where they actually do not produce more harm, however, these results suggest that people might indeed “unfairly” evaluate forprofit organizations, thereby inducing potentially unethical impression management strategies that the for-profit entities otherwise would not have to engage in if people evaluated them similarly to other agents. Many different organizational agents can engage in unethical behavior, and the present experiments suggest that people can respond to such behaviors quite differently. We believe that one fruitful avenue of future research is to continue investigating these descriptive inequalities in ethical judgment to continue informing normative approaches to business ethics (and, specific to these experiments, corporate personhood).