Consider two companies United States Steel (X) and Facebook (FB)..docx

Consider two companies: United States Steel (X) and Facebook
(FB).
Look at the profiles (financial statements for 2016) of each on
yahoo finance and discuss the followings (you need to calculate
these values yourself and show details of your calculations):
1. How many outstanding shares does the company have?
2. What is the market value of the company?
3. What is the book value of the company?
4. Does the company pay dividends?
5. What is the beta for the company? Compare it with the beta
of market.
6. Retrieve their annual closing prices for the last 6 years.
7. Calculate annual rate of return of each stock for the last 5
years.
8. Estimate annual expected rate of return and standard
deviation of annual rate of return of each stock.
9. How do you find the risk free rate? (consider the market risk
premium to be 8%)
10. Using CAPM calculate the expected return on the equity for
the company.
11. What is the Weighted average cost of capital (WACC) for
the company?
12. What is the leverage (total debt/equity ratio) for the
company?
Calculate and analyze your result, conclude your opinions.
APA Format, references, minimum 5 pages.
(To get the required rate of return on debt, divide the interest
expense by total debt)
(To get the total debt, add the short term debt to long term debt)

Dwight
assuming Risk
Leaders face ethical decision all the time. It is an inherent
responsibility of all leaders. The best solution for PPI is to
continue with the inspections from outside agencies. My
philosophy on leadership and decision-making has always been
to simplify decisions as much as possible. Almost all decisions
come down to assuming risk! You will either assume risk in one
area or another. The question the leader must answer, is, where
does he/she want to assume that risk. Determining where to
assume risk comes down to taking a holistic view of the issue
and comparing it against organizational goals and needs (Thiel,
Bagdasarov, Harkrider, Johnson, & Mumford, 2012). In the case
of PPI, the organization’s leadership created a culture of safety
and efficiency. Which likely was rooted in the organization’s
values and mission statement. Therefore, the organization could
not comprise the very values it represented out of fear that an
employee would use previously discovered discrepancies
against them. In fact, there is an argument that the level of trust
that the organization built has garnered a mutual respect
between employee and employer. Which may prevent any such
liabilities of PPI. In the end, PPI has to decide where to assume
the risk. Does the organization want to assume risk in the daily
operations of the plant, and risk employee safety, organizational
output, and efficacy? Does the organization want to risk
employees using the inspections by outside agencies against
them? As a leader who is very familiar with these kinds of
ethical decisions, PPI needs to assume risk where the employees
might use the inspections against them in a lawsuit.
Conflict
Of equal importance is the conflict that exists between PPI’s
leadership and the legal team. This conflict, although
troublesome, is common in organizations. These conflicts arise
because different sections of an organization look at through
different lens and have different responsivities. Hence, the legal

team is only trying to protect the best interests of PPI.
However, what the legal team needs to realize, is that the
decision lies with the president. The legal team is there to
advise. The PPI leadership will take that information and make
the decision that is best for the organization. In the case study,
it is clear that the PPI leadership does not want to jeopardize
the values and ethics that the organization is built on.
Ethical Framework
The framework that relates to my solution of the ethical
dilemma, is called Sensemaking Strategy. Sensemaking strategy
is a cognitive process where individuals analyze a problem by
taking a look at the circumstances surrounding the issue
(Caughron et al., 2011). Thus, relating to my point about taking
a holistic view of an issue and determining where to assume the
risk. Sensemaking strategy has three components; problem
recognition, information gathering, and information integration
(Caughron et al., 2011). All three components give the decision-
maker the ability to see the issue as it relates to the
organization. Which in turn provides the decision-maker with
the most, if not all of the necessary information needed to make
a decision. In fact, one of the cognitive reasoning strategies
contained within sensemaking is to seek outside help and to
consider the effect the decision will have holistically (Caughron
et al., 2011, Table 1). Cognitive reasoning is the logically part
of our brain. When I was faced with difficult decisions as a
leader, I just applied simple logic and tried to make the decision
that had the least impact on the organization and the people in
it.
References
Caughron, J. J., Antes, A. L., Stenmark, C. K., Thiel, C. E.,
Wang, X., & Mumford, M. D. (2011). Sensemaking strategies
for ethical decision-making. Journal for Ethics &
Behavior, 21(5), 351-366.
http://dx.doi.org/10.1080/10508422.2011.604293
Thiel, C. E., Bagdasarov, Z., Harkrider, L., Johnson, J. F., &
Mumford, M. D. (2012, April 4). Leader ethical decision-

making in organizations: Strategies for Sensemaking. Journal
for Business Ethics, 107(1), 49-64.
http://dx.doi.org/10.1007/s10551-012-1299-1
Brent
Case summary
In the case examined, the company Perfect Plastics Incorporated
(PPI) has two opposing ethical frameworks. The leader’s ethical
framework is altruism. Altruism places a focus on the needs of
the employee and not the larger interest of the company
(Northouse, 2016). The opposing view of the PPI attorneys’
framework is more aligned with utilitarianism. Utilitarianism
places an equal emphasis on the company’s interest and the
employees (Gustafson, 2013; Northouse, 2016). The central
discussion in the case is whether or not PPI does preventative
safety inspections. The opposing views impact the employee's
safety, moral, and performance. The leader demonstrates a
deontological perspective of focusing on the preventative safety
for the employees. The attorneys demonstrate a teleological
perspective with a concern for lawsuits as a result of an
employee injury. The attorneys view the preventative safety
inspections as an additional liability to the company. However,
the attorneys do not object to the safety standards used by PPI.
Ethical frameworks of leadership
Ethical decisions, actions, and behaviors are part of leadership
(Northouse, 2016). The domains of ethical theory are

consequences, duty, and virtue (Northouse, 2016).
Consequences, or teleological theories, emphasizes the end
purpose of a leaders action (Northouse, 2016). Duty, or
deontological theories, focus on the actions and moral
obligations of the leader (Northouse, 2016). Virtue-based
theories are based on leaders behaviors, either innate or learned
(Northouse, 20016). Leaders display their morals to the
organization which causes the employees to either trust or
distrust the leader (Hoover & Pepper, 2014; Turner, Barling,
Epitropaki, Butcher, and Milner, 2002).
Leadership styles contain an ethical framework that is
influenced by the leader's motives, morals, and self-interests.
For example, leadership styles such as transformational have a
solid ethical framework for influencing the organization
(Northouse, 2016). Transformation leaders focus on the greater
goals of the organization and not personal interest (Bass &
Avolio, 1993, Northouse, 2016). The focus on the greater good
of the organization, or the individuals of the organization,
instead of the leader’s interest is a form of altruism, virtual-
based theories (Northouse, 2016). In contrast, a transactional
leader does not focus on the individual interest of employees.
The transactional leader establishes the exchange that benefits
both the employee and the company (Bass & Avolio, 1993). The
ethical framework closely aligned to transactional leaders is
utilitarianism (Northouse, 2016; Turner et al., 2002).
Conclusion
The leader’s ethical framework remains the same for the
preventative safety inspections. Although the attorneys’ concern
for litigation is valid, a sudden change in the established
procedure is likely to cause employees to distrust leadership.
The leader created a trust with employees by using the
framework of altruism. The concern for the employees, or
individuals, benefit over the concern for the company is
altruism (Northouse, 2016). The routine preventative safety
inspections are an example of the leader demonstrating moral
obligations to the employees. Also, the inspections and

subsequent changes established trust between the employees and
the leadership. Leaders demonstrate their moral obligations by
actions that exemplify them (Turner et al., 2002). Employees
view the actions and develop a trust with the leader to act
inconsistent manner (Hoover & Pepper, 2014). If the inspections
and subsequent improvements stop, the employees established
trust would be negatively impacted.
References
Bass, B. M., & Avolio, B.J. (1993). Transformational leadership
and organizational culture. Public Administration Quarterly,
17(1), 112-121.
Gustafson, A. (2013). In defense of a utilitarian business
ethic. Business & Society Review, 118(3), 325–360.
doi:10.1111/basr.12013
Hoover, K. F., & Pepper, M. B. (2015). How did they say that?
Ethics statements and normative frameworks at best companies
to work for. Journal of Business Ethics, 131(3), 605-617.
doi:10.1007/s10551-014-2255-z
Northouse, P.G. (2016). Leadership: Theory and practice (7th
ed.). Thousand Oaks, CA: Sage.
Turner, N., Barling, J., Epitropaki, O., Butcher, V., & Milner,
C. (2002). Transformational leadership and moral
reasoning. Journal of Applied Psychology, 87(2), 304–311.
doi:10.1037/0021-9010.87.2.304
Developing a Framework for Ethical Leadership
Alan Lawton • Iliana Páez
Received: 4 April 2013 / Accepted: 6 June 2014 / Published
online: 29 June 2014
! Springer Science+Business Media Dordrecht 2014

Abstract Interest in ethical leadership from academics
and practitioners has grown enormously in recent years.
This article addresses this literature through a framework
that identifies three interlocking questions. First, who are
ethical leaders and what are their characteristics? Second,
how do ethical leaders do what they do? Third, why do
leaders do as they do and what are the outcomes of ethical
leadership? Different dimensions to ethical leadership are
examined and presented as three interlocking circles; Vir-
tues, Purposes and Practices. This framework presents an
integrated approach to ethical leadership and argues that
future research take this holistic framework and apply it to
different sectors or contexts.
Keywords Ethical leadership ! Ethical theory ! Ethical
practices
Introduction
The ethical dimension of leadership has, increasingly, been
of interest to both the general public and to scholars,
motivated partly by the corporate scandals that have
involved the unethical behaviour of top executives in
leading organizations throughout the world and has gen-

erated responses from both the academic and practitioner
communities (see, for example, the Index of Leadership
Trust developed by the Institute of Leadership and Man-
agement and Management Today). Notwithstanding recent
concerns, the relationship between ethics and leadership
has been explored by management academics for some
time and constituted early definitions of leadership (Bar-
nard 1938; Burns 1978; Selznick 1957). Part of the role of
leadership, it was claimed, included creating the ‘moral
organization’, promoting development in others, and in-
stitutionalising values within the organization’s culture.
More recently, Whetstone (2005) has presented a frame-
work for organizational virtues that is based upon the
relationships between mission, culture and leadership.
There are a number of key issues and questions that
emerge in the literature. For example, what is distinctive
about the ethics of leadership in contrast to other areas of
ethics (Ciulla 2005)? Do leaders stand apart from normal
ethical considerations? Is there something unique about
leadership such that leaders need demonstrate ethical
standards over and above the norm in the way that certain
of the professions might (see Carlisle and Manning 1996)?

Ciulla argues, for example, that what is distinctive is the
concept of vision; ‘Visions are not simple goals, but rather
ways of seeing the future that implicitly or explicitly entail
some notion of the good’ (2005, p. 325). Other areas of
distinctiveness might include their obligations to others,
particularly their followers, as a result of the leaders’
special position in terms of power, status, and authority.
Ciulla also argues that leadership is distinctive because of
its range—moral failure impacts a large number of people.
At the same time, and discussed extensively in the political
science and philosophy literature, do the requirements of
ethics not apply to certain roles such that the judgements of
ethics are, in some sense, deemed inappropriate (see the
discussion of the ‘Dirty Hands’ of politicians introduced by
Walzer and discussed in Coady 2008; Mendus 2009).
A. Lawton (&)
Federation University, Ballarat, Australia
e-mail: [email protected]
I. Páez
Universidad de Los Andes, Bogotá, Colombia
123
J Bus Ethics (2015) 130:639–649

DOI 10.1007/s10551-014-2244-2
Second, we are interested in what is the relationship
between being a good leader in a moral sense and being an
effective leader; a simple distinction but one that raises
interesting issues. In the literature, there is often a dis-
tinction between moral excellence and technical excellence
(see Ciulla 2005; Price 2008). A different view suggests
that, depending upon our approach to virtue, the two are
compatible and that Machiavelli’s virtú combines both
virtue and skill (see Macaulay and Lawton 2006). A further
view argues that leadership is about ‘being’ rather ‘than
‘doing’ (Cunliffe 2009). We propose, below, that the dif-
ferent views can be reconciled through the interlocking of
Virtues and Purposes.
Third, how are self-interest, the interests of the organi-
zation and the interests of the wider community recon-
ciled? How are the interests of shareholders and wider
stakeholders balanced? Does a psychological approach to
leadership privilege the individual at the expense of others?
Has there been too much focus on the self such that ethical
leadership becomes unattainable? (Knights and O’Leary

2006). Indeed what is the concept of the self in leadership
studies (Ford 2006)? What is the context within which
ethical leadership takes place (see Knights and O’Leary
2006) and can the concept of a social practice help in
locating that context (see MacIntyre 1985)? We discuss the
concept of a practice below and propose Practices as the
third interlocking circle in our framework.
These are all ‘big’ questions and they have been
addressed in different ways; at this stage it is appropriate to
offer preliminary remarks concerning the nature of lead-
ership and then to outline the scope of the article. We
identify three dimensions to leadership: Leadership in,
leadership of, and leadership for. Leadership in involves
activity; in this context those who lead may be motivated
by the desire to explore new territories (geographical or
otherwise), whether exercised in the practice of science, of
art, music, sport or a whole range of other activities.
Leaders are driven by curiosity and may stretch rules or
conventions to see where their imaginations will take them.
Leading is not being bound by convention, it is being
curious for the sake of it, seeking new challenges; it may
offer its own reward and not necessarily be concerned with

the outcome since that can rarely be predicted. From this
perspective, being recognised as a leader in whatever field
requires peer recognition yet such individuals may not
crave followers or be interested in setting an example to
others. It is likely that such leaders will be concerned with
excellence in that activity and will attract followers. The
pursuit of excellence is compatible with a virtue approach
to ethics.
In contrast, leadership of may include setting an exam-
ple to others, motivating them and inspiring them to follow
in pursuit of some set of goals. It involves engagement in a
set of relationships, and will involve responsibilities to, and
for, others. It will be compatible with a deontological
approach to ethics. Leadership for will involve the pursuit
of some organisational or societal goal; it may be con-
cerned with creating a vision of an ethical purpose. If
leadership is about outcomes then it will be compatible
with a consequentialist approach to ethics.
Thus, this article focuses on a number of key questions;
1. Who are ethical leaders and what are their character-
istics; the article examines key definitions of leader-
ship and ethical character and virtues, including

integrity and authenticity.
2. How do ethical leaders do what they do; this section of
the article examines how leaders treat others and what
are their relationships with others and in what contexts
do these relationships take place.
3. Why do ethical leaders do what they do, for what
purpose; what is the relationship between leadership
and outcomes, both for individuals and the
organization.
Figure 1 captures the relationship between these three
questions; between who, how and why.
We suggest that the three circles will interlock and will
not necessarily form discrete areas of ethics. For example,
a public official will need to be of good character exhib-
iting, for example, honesty, selflessness and objectivity.
These will be exercised in their relations with patients,
clients or consumers through non-maleficence and benefi-
cence in order to promote justice and the common good
(Beauchamp and Childress 2008; Lawton et al. 2013). We
use these three dimensions to frame our discussion of the
literature and then propose a research framework that maps

onto these dimensions.
Who are ethical
leaders and what
are their
characteristics?
How do they
do what they
do?
Why do they
do what they
do?
Fig. 1 The who, how and why of leadership ethics
640 A. Lawton, I. Páez
123
Who are Ethical Leaders and What are Their
Characteristics?
One much-used definition of ethical leadership is the one
offered by Brown and colleagues, which proposes that
ethical leadership is ‘‘the demonstration of normatively
appropriate conduct through personal actions and inter-

personal relationships, and the promotion of such conduct
to followers through two-way communication, reinforce-
ment, and decision-making’’ (Brown, Treviño and Harrison
2005, p. 120). Here, ethical leadership involves some
aspect of personal conduct, deemed ethically appropriate,
in decision-making and developing relations with others,
such that these others are inspired to follow. Yet prior to
the question of what do leaders do, is what kind of person
they are. Much of the literature has focused on the use of a
virtues approach. However, we need to know what we
mean by person—is there a difference between an indi-
vidual qua individual and an individual qua position holder,
in an organisation or otherwise? Thus a distinction has
been made between the moral person and the moral man-
ager (Treviño et al. 2000; Brown and Treviño 2006),
raising the question is the good manager necessarily the
good person and vice versa. According to this account the
ethical leader reflects both the moral person in terms of
individual virtues such as honesty and integrity, and the
moral manager in terms of setting an example, communi-
cating ethical standards and so on. We also introduced
earlier the distinction between moral excellence and tech-

nical excellence; whereas virtue is bound up in ideas of
morality, offering perspectives that shape the way we live,
competence embodies notions of learned skills and tech-
nical efficiency. Competence highlights action rather than
character, as it is ‘‘built around the fundamental principle
of demonstrating capability’’ (Naquin and Holton 2003
p. 25). However, Machiavelli’s virtù, which has been lar-
gely ignored in the literature (see Macaulay and Lawton
2006), may reconcile the two. Virtù was considered, more
generally, as the skills and excellences of leadership
including military prowess and diplomatic sensitivity and
was not a moral construct as such yet still required right
action. ‘‘Machiavelli’s conflation of virtue and skill argu-
ably fits in more comfortably with notions of managerial
(or leadership) competencies, than the more moral char-
acter traits of virtue theory.’’ (Macaulay and Lawton 2006,
p. 704).
Our discussion of leadership ‘in’ suggests that technical
excellence may not necessarily be ethical in character.
Judging technical excellence, or competency, and the
extent to which it is ethical or not, will depend upon the
practice within which it is found and we discuss this below.

At the same time there may be a tension between leader-
ship ‘of’ and leadership ‘for’; if leadership ‘for’ is to ‘make
the trains run on time’ does it matter how this is done?
Thus, our three perspectives on leadership are compatible
with different versions of ethics but do not require ethics.
Virtues
The concept of virtue, derived from Aristotle (1947), has
featured prominently in the discussion of leadership ethics
(Arjoon 2000; Bragues 2006; Cawley et al. 2000; Sarros
et al. 2006). Aristotle identified a number of moral vir-
tues—courage, temperance, pride, good temper, friendli-
ness and truthfulness—that as excellences of character
enabled man (sic) to live the good life. Virtue, both moral
and intellectual, is the means by which we become fully
human because it allows us to achieve our natural end, the
eudaimonic good life. Eudaimonia has been variously
translated as ‘happiness’, ‘bliss’ or ‘well-being’. ‘‘Virtues
are character traits which we need to live humanly flour-
ishingly lives’’ (Oakley and Cocking 2001 p. 18).
Virtues are central to character (Sarros et al. 2006), and
in leadership character is seen as ‘‘moral excellence’’

(Hendrix et al. 2004), and can be developed (Peterson and
Seligman 2003, 2004); Mendonca 2001). Typically, such
virtues include humility, courage, integrity, compassion,
humour, passion; and wisdom (Sarros et al. 2006); honesty,
fairness, kindness (London 1999); or altruism (Engelbrecht
et al. 2005); determination, tolerance, enthusiasm and
responsibility (Guillen and Gonzalez 2001; Solomon
1999); love, forgiveness, and trust (Caldwell and Dixon
2010).
Clearly, there is a danger of providing lists of virtues to
pick-and-mix from. However, two virtues that appear
prominently in the literature are integrity and authenticity.
Integrity
Many authors see integrity as fundamental to ethical
leadership (Brown et al. 2005; Engelbrecht et al. 2005;
Parry and Proctor-Thomson 2002; Heres 2010; Huberts
et al. 2007; Keating et al. 2007; Kolthoff et al. 2010; Re-
sick et al. 2006). Brown and Treviño (2006) assert that
subordinates are accustomed to thinking about their leader
in terms of ethics and integrity.
According to Badaracco and Ellsworth (1991), the word
integrity suggests wholeness, coherence, and a sense of

moral soundness, in which the core values are honesty and
justice. These authors hold that leaders with integrity will
try to keep consistency and coherence between their beliefs
and the way they act. Integrity is also about demonstrating
exemplary moral behaviour (Brenkert 2004), consistent
with laws and codes (Dobel 1999), and in accordance with
moral principles, norms and values (Fijnaut and Huberts
2002).
Developing a Framework for Ethical Leadership 641
123
Integrity is demonstrated in daily behaviour and recog-
nized as a key factor in ethical leadership behaviour (De
Hoogh and Den Hartog 2008; Den Hartog and De Hoogh
2009). It reflects the coherence of the leader in his/her
behaviours by which he/she obtains credibility. Simons
(2002) defined behavioural integrity as ‘‘the perceived
pattern of alignment between an actor’s words and deeds’’
(p. 19). Behaving with integrity entails the ability to
determine the ethically correct course of action in a given
situation (Keating et al. 2007) and the ability to both

determine and engage in morally correct behaviour (Den
Hartog and De Hoogh 2009). Integrity is also considered a
fundamental component of character (Petrick and Quinn
1997), and has been recognized cross-culturally as one of
the pillars of ethical leadership (Resick et al. 2006). A
major research programme, the GLOBE project (Global
Leadership and Organizational Behaviour Effectiveness)
was designed to explore the effects of culture on leader-
ship, organizational effectiveness, economic competitive-
ness of societies, and the human condition of members of
the societies (House et al. 2004), in 62 different societies
during the mid-1990s. The framework for cultural values
was derived from Hofstede’s (1980, 2001) cultural
dimensions viz uncertainty avoidance, power distance,
institutional collectivism, in-group collectivism, gender
egalitarianism, assertiveness, future orientation, perfor-
mance orientation, and humane orientation. Concerning
leadership in general, House and his colleagues found that
charismatic/value-based leadership and integrity attributes
were positively endorsed as contributors of outstanding
leadership by all cultures included in their study (House
et al. 1999).

Integrity is also considered as part of the conscien-
tiousness trait of personality in relation to leadership.
According to Hogan et al. (1994), conscientious individuals
have integrity and generate trust. For (Engelbrecht et al.
2005), integrity implies virtue, honesty and sincerity. Pa-
lanski and Yammarino (2007) identify four behavioural
aspects of integrity: integrity as consistency of words and
actions, integrity as consistency in adversity, integrity as
being true to oneself, and integrity as moral/ethical
behaviour. It is interesting to note that it could be argued
that the first three behaviours may not, in fact, require
ethics at all. They also highlight that integrity is expected
to be accompanied by similar virtues such as authenticity,
honesty, trustworthiness, fairness, and compassion; and
moreover, these other virtues may form a boundary con-
dition for integrity. Accordingly, then, integrity involves
wholeness, consistency, coherence and involves acting in
accordance with principles, norms and values, or in
accordance with laws and codes.
Integrity, then, seems to consist of both a character trait
and behaviour; it is both a possession and an action.

Authenticity
Authenticity is about knowing oneself and acting trans-
parently in accordance with one’s beliefs and values (May
et al. 2003; Avolio et al. 2004). Self-awareness, self-con-
trol and consistency and coherence in behaviours are key
features of the authentic leader (Avolio and Gardner 2005;
Shamir and Eilam 2005). For Luthans and Avolio (2003),
the authentic leader is confident, hopeful, optimistic,
resilient, moral/ethical, future-oriented, and gives priority
to developing associates to be leaders. The authentic lea-
der is true to him/herself and the exhibited behaviour
positively transforms or develops associates into leaders
themselves (p. 243).
Yet the notion of ‘being true to oneself’ may be prob-
lematic. The idea of the one, and consistent, self is usually
taken for granted and yet, at the same time, the notion of
the self as a series of self-contained multiple selves
sometimes in competition with each other may also obtain
(i.e. we move, occasionally uneasily, between different
roles of, for example, father, spouse, brother etc.). Identity
may be fragmented and multiple, containing contradictory
selves and, within organisations, competing discourses (see

Ford 2006).
For (Walumbwa et al. 2008), authentic leadership is
more than being true to oneself, and they developed a
multi-dimensional model of the authentic leadership con-
struct, in which four elements are defined: self-awareness,
relational transparency, internalized moral perspective, and
balanced processing. Their construct built upon previous
definitions of Luthans and Avolio’s (2003), (Gardner et al.
2005) and Ilies et al. (2005), resulting in the following
definition: authentic leadership is a pattern of leader
behaviour that draws upon and promotes both positive
psychological capacities and a positive ethical climate, to
foster greater self-awareness, an internalized moral per-
spective, balanced processing of information, and rela-
tional transparency on the part of leaders working with
followers, fostering positive self-development (p. 94).
Leadership is perceived as relational and the idea of
authenticity transcends the self and, as such, is recog-
nized and legitimated by others. Thus, Shamir and Eilam
(2005) argue that to be an authentic leader it is not
sufficient that the leader has a high sense of self-

awareness and consistency, authenticity emerges from the
narrative process in which others play a constitutive role.
Leadership is co-constructed on an ongoing basis (Fair-
hurst and Grant 2010; Grint 2005). This is distinct from
the possibility of self-centred forms of self-fulfilment that
Taylor identified as part of the post-modern malaise
(Taylor 1991).
On these accounts then, both integrity and authenticity
are about doing, not just being.
123
How do Leaders do What They do and How are Their
Relations with Others Constituted?
For MacIntyre (1985) a virtue requires some prior account of
social and moral life and virtue is a complex, historical and
multi-layered concept. Virtue requires a practice, an account of
what constitutes a moral tradition. The paradigm of human
excellencewilldependuponthecontext—thewarrior(Homer),
the Athenian gentleman (Aristotle) or, more recently, the
sportsman or woman, or the entrepreneur. MacIntyre argues

that we cannot identify, for example, the Homeric virtues until
we have identified the key social roles in Homeric society.
Therefore our concept of leadership comes after our under-
standing of key roles in our society. For MacIntyre, the virtues
are grounded in human practices and consist of internal goods
such that standards of excellence are appropriate to the practice
of, for example, administration, farming, or medicine. External
goods exist outside, and independently, of that practice and
include fame, money, power, and reputation. Virtues are those
qualities that enable us to achieve internal goods. Not all
practices must be good and it is not always clear what makes up
a practice. Is leadership a practice, is business a practice? These
questions are unresolved (Beadle 2008; Moore 2005 but see
Beabout 2012). MacIntyre also distinguishes between a prac-
tice and an institution and he identifies institutions with the
potential to corrupt this practice. Thus medicine is a practice
and a hospital is an institution, education is a practice and a
university is an institution. ‘Without justice, courage and
truthfulness, practices could not resist the corrupting power of
institutions’ (MacIntyre 1985, p. 194). At the same time the
idea that only those involved in a practice can understand and,
therefore, pass judgment on the practice is contestable (Kieran

1995; Moore 2008).
If we assume, for the moment, that leadership constitutes a
practice, what might be the internal goods of leadership? A
concern with how leaders engage with others has been a major
theme in the literature, focusing on both the nature of rela-
tionships with others and the content of that relationship.
Underpinning such relationships is a focus on responsible
leadership (Freeman et al. 2006; Maak and Pless 2006).
According to Enderle (1987), ‘‘when managers put the
question of ethical responsibility seriously, they become more
sensitive to the voices of those who will be affected by their
decisions’’ (p. 658).
Maak and Pless (2006) propose a relational understanding
of the concept of leadership. They define responsible leader-
ship as the art of building and sustaining relationships with all
relevant stakeholders. Relational leaders are described as the
‘weavers’ and facilitators of trusting stakeholder relations
(Howell and Avolio 1992), who have the capacity to assess
complex situations and problems from the perspectives of
different stakeholder and recognise that these stakeholders
may have diverse and conflicting objectives. Such leaders
balance the relationship dynamics aligning the different val-

ues of the various parties in a way that servesthe interest ofall.
A key question is how and where to draw a boundary around
those whom will be affected. The concept of the ‘other’ is
engaging scholars. Knights and O’Leary (2006) argue that
leadership theories tend to be overly focused on the ‘autono-
mous subject of Enlightenment thinking’ and leadership is seen
to be the property of individuals not that of social groups or
institutions, which results in individualistic theories of leader-
ship. These authors build on Levinas work about the ethics of
responsibility,inwhich the notionofthe self isgenerated notby
the self but rather through engagement with the Other, an
engagementthat isdefinedbya sense of responsibility (Levinas
1966). According to Knights and O’Leary, leaders’ ethical
responsibility is in their relations with others.
Similarly, Painter-Morland (2008), for example, argues
that the responsibility to nurture and encourage a relationally
responsive ethical attitude among the members of an orga-
nizationalsystemissharedbyall whoparticipate init.Painter-
Morland holds that leadership is socially construed from
complex interactions between individuals and groups, in
which creating and sustaining relationships of trust is how to
deal with complex organizational systems within dynamic

environments. Not only that, but also concepts such as trust
are important insofar as they may enhance the effectiveness of
the organization. High trust may lead to low transaction
costs—ethical business practices are not only important in
themselves as part of exchange relationships but also for
organizational outcomes. Leadership of, and as we argue
below, leadership for, both find expression within an institu-
tion. Institutions may nurture the relationships between the
leader and their followers and not, as MacIntyre has it, corrupt
the practice of leadership.
However, one of the characteristics of ethical leaders is
a concern with how their decisions affect others (Murphy
and Enderle 1995). When managers take this into account,
they became more sensitive of others needs inside and
outside of the organization. In order to make ethical deci-
sions, leaders require the use of ethical concepts and
principles (Dukerich et al. 1990) in their moral judgments.
At the same time is there something distinctive about the
scope, scale and types of decisions that leaders make?
Decisions by leaders may be far-reaching and wide-rang-
ing, non-routine, complex, with high stakes, and require the

exercise of judgment and not just the application of rules.
Why do Leaders do What They do and What are
the Outcomes of Leadership?
Much of the literature has focused on the relationship
between leadership and effectiveness in bringing about a
number of outcomes. The main foci have been with:
123
(i) individual outcomes for employees such as
followers’ voice behaviour (Walumbwa and
Schaubroeck 2009), follower job satisfaction,
commitment and perceptions of ethical climate
(Neubert et al. 2009; Rowold et al. 2009),
subordinate’s job performance (Piccolo et al.
2010).
(ii) individual outcomes concerning the leader them-
selves, such as promotability (Rubin et al. 2010).
(iii) group level outcomes such as organizational
citizenship behaviours -OCBs (Mayer et al.
2009), and group counter-productive work

behaviours—CWBs (Detert et al. 2007).
Thus, leaders, acting fairly and with consideration for
others may elicit positive responses in employees’ attitudes
and behaviours (Brown et al. 2005; Brown and Treviño
2006). According to Caldwell and Dixon (2010), leaders
who exhibit love, forgiveness, build relationship with
employees based on trust, and treat them with dignity and
respect, enhance employees’ self-efficacy, as well as,
commitment and loyalty (Cameron et al. 2003) and per-
formance (Cameron et al. 2004).
Kalshoven et al. (2011) build upon the behavioural
perspective of Brown et al. (2005), and developed a new
measure. They suggested, following De Hoogh and Den
Hartog (2008), that ethical leadership is a multi-dimen-
sional construct. That is, it involves different behaviours
that may have different antecedents and outcomes, which
as a whole, describe ethical leadership. Their aim was to
evaluate which types of leader behaviours may be seen as
ethical. Kalshoven (2010) developed the Ethical Leader-
ship at Work (ELW) questionnaire in which seven
dimensions of ethical leadership are developed and tested:
fairness, power sharing, role clarification, people orienta-

tion, integrity, ethical guidance, and concern for sustain-
ability. In line with this multi-dimensional construct, she
found different relationships between the various behav-
iours of ethical leadership and outcomes. For example,
fairness and power sharing were positively related to
employees’ organizational citizenship behaviours (OCBs).
In general, she found that ethical leadership is positively
related to leader effectiveness, trust in the leader, employee
effectiveness, OCBs and satisfaction with the leader. Kal-
shoven also tested for the antecedents of ethical leadership
using the Big Five model of factors of personality (McCrae
and John 1992) finding that conscientiousness and agree-
ableness were the most related to ethical leadership. Thus,
ethical leadership can be understood as a more complex
construct involving a broader set of ethical behaviours.
However, outcomes at the organisational and societal
level have been more difficult to identify. The concept of
purpose is crucial to Aristotle’s account, and yet modern
scholars have, we believe, sought to identify virtues in
organizations at the neglect of a discussion of purpose.
Virtue is the means by which we become fully human

because it allows us to fulfil our particular human end, the
eudaimonic good life. This concept relates to Aristotle’s
teleological belief that something can only be understood
and fulfilled once it has reached its natural end. There is a
purpose to it. The good life can thus be recognized,
understood and, most importantly, attained. Aristotle’s
virtue theory, therefore, necessarily prioritizes the good
over the right, a distinction that remains crucial to virtue
ethics today (Mangini 2000; Oakley and Cocking 2001).
Macaulay and Lawton (2006) hold that not only is virtue
necessary for good governance, but it is also political in a
broader sense, as it cannot be cultivated or practiced out-
side of the polis. Man can only achieve eudaimonia inside
the polis because it is only this particular form of associ-
ation that facilitates the development of his human self.
There have, however, been a limited number of attempts
to link virtue to organisational purpose. Arjoon (2000),
Bragues (2006), and Flynn (2008) offer frameworks to
understand business and leadership ethics from the point of
view of virtue ethics. According to Bragues (2006), the
greatest ethical imperative for business (from an Aristote-
lian point of view) is to give individuals opportunities to

participate in the management of the organisation and to
contemplate wider implications. ‘‘Affording individuals
chances to apply their leadership skills and engage in
philosophic reflection constitutes the most important mis-
sion of Aristotelian business ethics’’ (Bragues 2006, p.355).
Arjoon (2000) developed a meta-theory of business based
on virtue theory which links the concept of virtues, the
common good, and the economy into a unifying and
comprehensive theory of business. According to Arjoon,
leadership falls into the realm of ethics where true lead-
ership is ethical leadership. Arjoon holds that true leaders
should have a clear vision of the common good and the
means to promote it, and that leaders are supposed to lead
people to attain some goal or objective, and this objective,
from a virtue theory perspective, must be the common
good. Finally, Flynn (2008) argues that leadership is
placing business at the service of society. Flynn proposes
that leaders should recognise the psychological, social and
spiritual values, and associated needs, of individual work-
ers and their families, in which the character of the leader is
essential. Clearly, the problem with such views is their
normative character, and it raises a whole host of questions

concerning the extent to which individuals seek purpose
from their work places.
The notion of ethical stewardship has been used in this
context. Ethical stewardship is described as an ‘‘ethically
superior governance model that creates long-term organi-
zational wealth by generating increased employee
123
commitment’’ (Caldwell 2009, p. 161). According to
Caldwell and colleagues, leaders engender commitment
when they build trust and ensure the welfare, growth, and
‘wholeness’ of all stakeholders (Caldwell et al. 2002).
However, we concur with Kempster et al. (2011) that
there has been too little discussion of the relationship
between leadership and organizational purpose. From an
ethical point of view, the focus on the individual agent, and
his or her actions, is appropriate. To examine the ethics of
the organization is more problematic if ethics is to be found
in the processes, and the relationships, through which the
organization achieves its goals. Morality may be said to

establish the conditions, not the goals, of conduct.
Discussion
We recognise, with other scholars, that there have been
neglected areas of ethical leadership research; in particular,
research on antecedents (Kalshoven et al. 2011; Eisenbeiß
and Giessner 2012), purpose (Kempster et al. 2011) or
indeed, ethical theory itself (Ciulla 2005; Rost, 1995).
Different approaches have been taken to the study of eth-
ical leadership and in so doing have raised a number of
fundamental issues. The development of measures to
explore the ethical behaviour of leaders and the subsequent
use of these measures has led to some interesting findings.
Thus, some studies have endorsed the idea that certain
dimensions of ethical leadership are cross-culturally
endorsed (Resick et al. 2011; Den Hartog et al. 1999).
Other studies have found divergence based on the indivi-
dualist-collectivist dimension (Keating et al. 2007; Martin
et al. 2009). Some authors take a non-Western approach to
study the ethical dimension of leadership, for example,
Kemavuthanon and Duberley (2009) who use a Buddhist
view of leadership in a case study in Thailand or Prince

(2005) examining Taoism and leadership. Other scholars
have offered an integrated, holistic approach (Eisenbeiss
2012). Drawing on different religious and ethical traditions
Eisenbeiss (2012) identifies 4 ethical orientations for
leadership; 1) humane orientation, 2) justice orientation, 3)
responsibility and sustainability orientation, and 4) mod-
eration orientation.
However, the question of the universalizability of ethics
is not new and raises key questions concerning the foun-
dation and source of ethical beliefs, values and justifica-
tions of ethical behaviour. Thus studies have moved
beyond a focus on individual attributes and have intro-
duced cultural, political and social norms. This resonates
with our earlier discussion of the relationships between
virtue, the practice and the norms of particular societies.
However, we need to separate questions of fact and value.
Cross-cultural studies demonstrate the existence of
common ethical attributes and also differences; this is not
the same as endorsing a particular set of values. Dworkin
(2012) argues for the unity of value but he distinguishes
between moral judgments within a system of values (first-

order or substantive) and judgments about a system of
values (second-order or meta). We need to be clear about
the kinds of claims that are being made, empirical or
normative, and the extent to which ‘living well’ can be
found within organizational life as those who seek to link
virtue to purpose seek to demonstrate. Can individual
purpose be identified with organizational purpose in much
the same way as individual purpose was embedded within
the Athenian polis?
Clearly, there have been a range of different approaches
adopted and it is difficult to get a sense of research into
ethical leadership as a coherent body of study. We suggest
the following framework, Fig. 2, to draw together the dif-
ferent dimensions to ethical leadership. These dimensions
interlock in terms of the who, why and how of leadership.
Authentic leaders act with integrity through their rela-
tionships with others to achieve ethical outcomes. Ethical
outcomes require virtuous leaders who engage with others
responsibly and build trust.
We argue that a discussion of the virtues cannot be
separated from the context within which they are practised.
We also suggest that the exercise of different virtues will

be appropriate to the different roles that leaders play. For
example, the creation of a vision and purpose may require
courage and moral imagination; ethical decision-making,
as part of a practice, may require judgement, competence
and prudence; inspiring others may require honesty,
transparency and providing a moral exemplar. In this sense
virtues cannot be separate from practices and purposes. Our
holistic approach to ethical leadership might best be
understood in terms of distinct types of activities where the
interplay of virtues, practices and purposes will lead to
different forms of ethical leadership. This could, for
example, be found in sectoral differences; the professional
Practices
VirtuesPurposes
Fig. 2 Research framework
123
practices of public officials, not to break the law, to act on
behalf of the public, to treat citizens equitably and impar-
tially, and so on, will require different ethical consider-

ations, particularly in terms of purpose. Context will have a
bearing on vision — e.g. public officials both elected and
appointed subscribe to the notion of acting in the public
interest, and will have a view of what that actually means.
The justification for their actions may be different than for
those in other sectors. We need more on the nature of
explanation and justification. Thus ethnographic research
might ask ‘Why did you act in the way that you did and
what reasons can you give for acting in such a way? Or
‘Why did you make the decisions that you did’? In her
study comparing the understanding of ethical leadership
between public and private organizations in The Nether-
lands, Heres (2010) found both similarities and differences.
Concerning similarities, she found that in general, man-
agers of both type of organizations view ethical leadership
as grounded in the person of the ethical leader. That is,
ethical leadership is highly associated with the ‘moral
person’. The traits in which there seem to be a general
agreement are authenticity, openness, and moral courage.
She found differences in ethical leaders’ traits in a pref-
erence for altruism and concern for the common good in

public sector managers, and for honesty in private sector
managers.
A virtues approach has much to commend it, particu-
larly if it is drawn more widely than Aristotelian virtues.
Whilst virtues may focus on the individual they will be
found in organizational practices that provide a context. At
the same time, they will be shaped by the wider purpose of
the organisation. Thus, practical wisdom is needed in or-
ganisations that link particular activities to organisational
ends and the good life (Beabout 2012).
Conclusions
A number of authors have argued for more ethical theory
(Ciulla 2005; Rost 1995). A different issue is to what extent
are their limits to the scope of ethics (Coady 2008). Why
should it be applied to everything as though it is an
umbrella that covers all our activities? Do we stop and
think of ethics in our day-to-day activities e.g. going
shopping, playing sport, playing chess etc. Coady (2008)
makes the distinction between morality and moralism,
which he considers a vice, which includes judging others in
the light of the moralizer’s own considerations. We have

argued that leadership can be examined from an ethical
perspective and that different dimensions of leadership are
compatible with different approaches to ethics.
We asked a number of questions in our Introduction and
we turn to our responses to these questions.
Question 1: What do Leaders do and What are Their
Characteristics?
Clearly there is a wealth of research in response to this
question, and a measure of disagreement. We pointed to the
notion that leadership is concerned with a vision, with
imagining some future state, and from an ethical point of
view this involves some notion of the good life. Rather
than this idealist approach we may take a more pragmatic
view and consider more modest ambitions i.e. in health
organizations this might be ‘do no harm’, in other orga-
nizations it might be ensuring that all employees are treated
with dignity, respect and justice. From these more humble
ambitions might flow the achievement of ‘grander’
ambitions.
We might also consider further the extent to which
leadership is, in MacInytre’s terms, a practice. We cannot

fulfil ourselves through having merely instrumental rela-
tionships. The implications is that leadership has its own
intrinsic rewards irrespective of consequences and these
rewards might be, for example, the sense of playing a part
in the development of others – the professor who sees the
development of their former Research Assistant into a
professor in their own right. If leadership constitutes such a
practice then it may be corrupted by an institution. Our
framework allows for external goods that might consist of,
for example, the public interest, which actually provides a
context for the practice rather than corrupting it.
Question 2: How do They do What They do?
What can leaders be held responsible for? One argument is
that the capacity to take responsibility when and where
needed should be nurtured throughout the organization
irrespective of the existence of a formal organizational
hierarchy. Yet we need to know more about what kinds of
decisions do individuals within organizations and at dif-
ferent levels make? We need more research on the links
between leadership and ethical decision-making (O’Fallon
and Butterfield 2005; Tenbrunsel and Smith-Crowe 2008;
Treviño et al. 2006).

At the same time, discretion requires judgement and
thus an element of leadership where individuals assess,
decide and act in ways that are not predetermined by rules
and regulations but require initiative and responsibility is
important.
Question 3: For What Purpose do They do it?
When assessing the impact of ethical leadership, as distinct
from leadership per se, then we might consider, for
example, personal freedom, human dignity, social har-
mony, or environmental sustainability as indicators of
123
impact? At present the effectiveness of leaders is deter-
mined by organisational factors rather than ethical factors,
notwithstanding the fact that the concept of ethical per-
formance is extremely tricky. At the same time whilst we
might expect our public sector organizations to promote
and pursue an ethical agenda is it enough that businesses
are comply with that agenda? We concur with Mumford

(2011, p. 5) that ‘‘…we need a better taxonomy of the key
outcomes associated with leadership.’’
Acknowledgments We would like to thank the anonymous
reviewers of this article who provided comprehensive and
thought-
provoking feedback on earlier versions of the paper.
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123
Reproduced with permission of the copyright owner. Further
reproduction prohibited without
permission.
Turning Inward or Focusing Out? Navigating Theories
of Interpersonal and Ethical Cognitions to Understand Ethical
Decision-Making
Lumina S. Albert • Scott J. Reynolds •
Bulent Turan
Received: 6 February 2014 / Accepted: 21 May 2014 / Published
online: 14 June 2014
! Springer Science+Business Media Dordrecht 2014
Abstract The literature on ethical decision-making is
rooted in a cognitive perspective that emphasizes the role
of moral judgment. Recent research in interpersonal
dynamics, however, has suggested that ethics revolves
around an individual’s perceptions and views of others. We
draw from both literatures to propose and empirically
examine a contingent model. We theorize that whether the

individual relies on cognitions about the ethical issue or
perceptions of others depends on the level of social con-
sensus surrounding the issue. We test our hypotheses in
three studies. Results suggest that not only does social
consensus determine whether an individual relies on ethical
cognitions about the issue or perceptions of others, but also
that an individual’s view of self is an important moderator
in these relationships. We conclude by considering impli-
cations of this research for theory and practice.
Keywords Ethical judgment ! Interpersonal
relationships ! Ethical decision-making ! Ethical behavior !
View of others ! View of self
Introduction
Corporate scandals, such as exaggerating revenue, paying
bribes, facilitating corrupt officials, and mishandling confi-
dential business information, have generated world-wide
interest in unethical behavior (Treviño et al. 2006). Although
many entities, including the United States Securities and
Exchange Commission and the United States Senate, have
exerted pressure on corporations to improve employee
behavior (Pulliam et al. 2010; Thiel et al. 2012), employees
continue to report that they feel pressure to compromise

standards and are experiencing retaliation when they report
misconduct by managers or organizational representatives
(National Business Ethics Survey 2011). Also troublesome
are recent national reports of misconduct by retail customers.
For instance, retailers estimated that holiday return fraud (in
the form of return of stolen merchandise and fraudulent pur-
chases) cost them $3.4 billion (National Retail Survey 2013).
These events highlight the importance of understanding the
determinants and dynamics of ethical decision-making across
both organizational (e.g., Butterfield et al. 2000) and con-
sumer contexts (e.g., Vitell & Muncy 2005; Vitell et al. 2001).
Behavioral ethics researchers have studied direct rela-
tionships between ethical behavior and a variety of ante-
cedent conditions. Some have focused on individual
differences in demographics, personality, and cognitive
ethical development (Treviño et al. 2006). However, a
significant amount of the literature in both organizational
and marketing ethics assumes that decision makers follow
a cognitive and rational approach that revolves around
moral judgments about the issue (e.g., Kohlberg 1981; Rest
1986; Reynolds 2006b; Vitell et al. 1991, 2001; Weber

1990). This substantial trend notwithstanding, some
scholars have suggested that the cognitive approach fails to
fully explain ethical behavior, and have therefore either
L. S. Albert (&)
College of Business, Colorado State University, Fort Collins,
CO 80523-1275, USA
S. J. Reynolds
Foster School of Business, University of Washington, Seattle,
WA 98195, USA
B. Turan
Department of Psychology, University of Alabama,
Birmingham, AL 35294, USA
123
J Bus Ethics (2015) 130:467–484
DOI 10.1007/s10551-014-2236-2
called for or suggested alternative approaches (e.g., Cohen
2010; Haidt 2001; Hannah et al. 2011; Reynolds 2006b;
Vitell et al. 2013; Weaver et al. 2014). In this vein, several
researchers have argued that a central aspect of ethics is a
‘‘consideration of others’’ (e.g., Brass et al. 1998). These
authors emphasize that interpersonal relationships play an
influential role in explaining individual ethical decision-

making (e.g., attachment theory: Albert and Horowitz
2009; social relationships: Bowler and Brass 2006; Brass
et al. 1998; interpersonal dominance: Son Hing et al.
2007). Indeed, research has indicated that one’s percep-
tions of others and intimacy of relationships with others
may be related positively to ethical behavior in specific
relationships (e.g., Brass et al. 1998; Venkataramani and
Dalal 2007; Vetlesen 1994). Additionally, several scholars
have also demonstrated that a lack of consideration for
others elicits unethical behavior, especially if these
behaviors help advance the self-interests of the decision-
maker (Duckitt 2001; Son Hing et al. 2007).
Despite a significant amount of research indicating the
value of cognitive analyses and interpersonal constructs in
explaining ethical behavior, no research has considered
these ideas concurrently. Accordingly, we argue that both
interpersonal and cognitive factors are critical yet contin-
gent factors in the individual ethical decision making
process. Specifically, we propose that whether individuals
rely on cognitive judgments or interpersonal factors
depends on the level of social consensus regarding the
moral issue—the degree of social agreement that the pro-

posed act is good or evil or right or wrong (Jones 1991).
Our results provide evidence that an integrated approach
involving both interpersonal and cognitive principles is not
only justified, but also provides a much more comprehen-
sive explanation of ethical behavior. This research thus
contributes to the literature by extending our understanding
of the cognitive and interpersonal aspects of ethical deci-
sion-making and by highlighting how the nature of the
moral issue can shape individual responses to ethical
situations.
Two Approaches to Ethical Behavior
The Cognitive Approach
Philosophers have studied ethical behavior for centuries,
and most have framed it as a cognitive exercise (Honderich
1995). This long-standing tradition is reflected in the ear-
liest and most widely-regarded theories explaining the
psychology of ethics (Hunt and Vitell 1986; Rest 1986).
For example, Rest’s (1986) four-component model claims
that ethical decision making first begins with ethical
awareness, an acknowledgment that the issue contains
ethical content. Once this recognition has been made, the

individual then makes a judgment about the issue at hand,
establishes an intention to behave ethically, and finally
engages in ethical behavior.
Ethical judgment, considered by many to be the most
critical element in the ethical decision making process
(Kohlberg 1981), has been researched quite thoroughly
(Goolsby and Hunt 1992; Greenberg 2002; Hunt and Vitell
1986; Hunt 1993; Vitell et al. 2001). Two of the most
foundational constructs of the ethical judgment literature
are consequentialism and formalism (Brady and Wheeler
1996). Per Reynolds (2006a), consequentialism is teleo-
logical or ends-based ethical decision making. It empha-
sizes the ‘‘end’’ or the outcome of an act and contends that
the ethical act is that which optimizes or creates the
greatest good or benefit. In contrast, formalism represents
deontological or obligation-based approaches to ethical
decision making. It emphasizes the ‘‘means’’—normative
patterns of behavior and other formal standards as deter-
minants of what is ethical (Brady and Wheeler 1996;
Honderich 1995; Hunt and Vitell 1986; Hunt 1993).
Together these two constructs capture the most funda-
mental of concerns in ethical decision-making, and as a

result, they have been used in numerous settings to explain
a variety of ethical phenomena ranging from perceptions of
justice (Schminke et al. 1997), consumer ethical decisions
(Vitell et al. 2001) and moral awareness (Reynolds 2006a)
to ethical behaviors such as honesty and cheating (Brady
and Wheeler 1996; Reynolds and Ceranic 2007). While
consequentialism and formalism explain a great deal about
ethical decision-making, several scholars have suggested
that an interpersonal approach also has much to add.
An Interpersonal Approach
Research has established that individuals have generalized
stances toward relationships and ‘‘others’’ that are often
spontaneous and unacknowledged (Pietromonaco and
Barrett 2000). As Kahn and Kram (1994) suggest, these
stances are internalized models developed in childhood that
individuals typically carry into adulthood, and which
influence behaviors across interpersonal situations.
According to Bowlby (1969, 1973), individuals develop
these internalized working models based on repeated
interactions with early significant figures that subsequently
serve as cognitive maps for navigating relationships

throughout one’s lifespan. Bowlby posited that these
working models are comprised of two complementary yet
distinct cognitive dimensions: a generalized ‘‘view of
others’’ and an internalized ‘‘view of self’’ (Albert and
Horowitz 2009; Bartholomew and Horowitz 1991; Dizen
and Berenbaum 2011; Kobak and Sceery 1988). While
468 L. S. Albert et al.
123
one’s view of others is formed based on expectations about
the availability and responsiveness of the attachment fig-
ure, one’s model of self reflects stabilized beliefs about the
acceptability and worth of the self. These working models
are thought to be malleable during early development but
once consolidated; they stabilize and influence one’s
behaviors through one’s lifetime (e.g., Kobak and Sceery
1988; Sroufe and Waters 1977).
As ethical behaviors often occur in social contexts
characterized by interpersonal dynamics (Albert and
Horowitz 2009; Brass et al. 1998; Son Hing et al. 2007), it
seems clear that these working models inform and shape

these behaviors. In fact, research in psychology has
established that an individual’s perception of others is one
of the most important determinants of warm and agreeable
behavior (Albert and Moskowitz 2014; Dizen and Beren-
baum 2011; Locke 2009; Mayer et al. 1995; Moskowitz
2010; Wood et al. 2010). Interpersonal theorists assert that
social perceptions will influence how individuals behave in
social situations (Albert and Moskowitz 2014; Horowitz
et al. 1997; Kiesler 1996; Moskowitz 2010). Individuals
who have a tendency to perceive others as hostile, quar-
relsome and unfair prepare to respond in hostile, unfair and
threatening ways themselves (e.g., Albert and Moskowitz
2014; Dodge and Crick 1990; Raine 2008). Likewise,
individuals who perceive others as friendly, compassionate,
agreeable and caring, respond with complementary positive
behaviors (Graziano et al. 2007; Graziano and Tobin
2002).
Baldwin (1992, 1995) suggested that an individual’s
views of others work in combination with his/her view of
self to determine how the individual interprets and
responds to interpersonal information, and that these con-
clusions then guide their behavior. Therefore, we suggest

that an interpersonal approach encompassing views of
others (and of the self) is not only justified, but also will
provide unique and valuable information on the interper-
sonal dynamics of ethical behavior. In the following sec-
tion, we theorize about how these factors act directly and in
combination with ethical judgments to shape ethical deci-
sion-making. In short, we suggest that the effects of these
factors depend on the level of social consensus regarding
the issue being considered (Jones 1991).
An Integrated Model Based on Social Consensus
Jones (1991) developed an issue-contingent model of eth-
ical decision-making in which he proposed that issues vary
in their moral intensity (the extent to which the issue
involves moral content). According to Jones, moral inten-
sity is comprised of six characteristics: magnitude of harm,
temporal immediacy, probability of effects, concentration
of effects, proximity, and social consensus. Social con-
sensus is ‘‘the degree of social agreement that a proposed
act is evil (or good)’’ (Jones 1991, p. 375); it ‘‘indicates the
extent to which there is a general concurrence within
society about the moral status of the issue’’ (Reynolds and

Ceranic 2007, p. 1611). Subsequent research has empiri-
cally demonstrated that social consensus is one of the most
important factors in determining an issue’s moral intensity
(Frey 2000).
When social consensus is high, a clear and shared
understanding of what constitutes ethical behavior is
apparent. We suggest that under such situations, the
individual does not need to rely on personal judgments
of ethicality (i.e., consequentialistic and formalistic
analyses of the issue) to determine what is moral.
Instead, the widely-accepted social standard regarding
the issue (i.e., social consensus) spontaneously informs
the individual regarding the ethical nature of the issue
(e.g., ‘‘charitable behavior is good behavior’’). High
social consensus does not, however, guarantee that the
individual will be motivated to perform that ethical
action. The individual must be motivated to act upon
that social consensus. Scholars have suggested that
individuals are motivated to engage in behaviors such as
making donations to charity, recycling bottles or donat-
ing food, because of their favorable views and feelings
about others (Silk 2006). As mentioned, interpersonal

research has established that an individual’s perception
of others is one of the most important determinants of
social behavior (Albert and Moskowitz 2014; Dizen and
Berenbaum 2011; Horowitz et al. 1997; Locke 2009).
Therefore, we expect that behavior in situations of high
social consensus will depend on the individual’s view of
others. If the individual perceives others positively, then
the individual is likely to respond with complementary
positive behaviors. Most importantly, such individuals
would have motivations to operate in a manner consis-
tent with larger social expectations expressed in the
social consensus factor. Thus, we propose the following:
Hypothesis 1a When social consensus regarding the
ethical issue is high, one’s view of others will positively
influence ethical behavior.
The literature on interpersonal relationships argues that
not only is the individual’s view of others important in
predicting interpersonal behavior, but also that the individ-
ual’s view of self affects behavior. The literature on self-
views and ethical behavior, however, reveals inconsistent
findings regarding their relationship. Conventional wisdom

regards low self-esteem as an important cause of violence
and unethical behavior (e.g., Long 1990; Oates and Forrest
1985; Wiehe 1991), but a substantial body of research
demonstrates that high self-esteem is closely associated with
Turning Inward or Focusing Out? 469
123
violence and unethical behavior (e.g., Baumeister et al.
1996; Bradshaw and Hazan 2006). Indeed, Baumeister et al.
(1996) argued that the typical self-defining statements of
perpetrators of violence and other harmful acts indicated
expressions of superiority and capability. These inconsis-
tencies indicate that the relationship between view of self
and ethical behavior is not as simple and linear as previously
theorized. Thus, we do not necessarily expect view of self to
have a direct effect on ethical behavior. Nevertheless, a
favorable self-image implies self-confidence to hold firmly
and unwaveringly to one’s beliefs and values. Individuals
with high self-views have been consistently shown to have a
greater capacity for self-regulation, persistence in their
beliefs and expressing behavior that is consistent with their

personal convictions than individuals with low self-esteem
(e.g., Crocker and Major 1989; Leary and Tangney 2003;
McFarlin et al. 1984). This favorable self-view should also
reinforce the individual’s ability to engage in behaviors that
are consistent with his or her interpersonal convictions.
Thus, we propose a moderating effect such that the more
favorable the individual’s view of self, the stronger the
relationship between the individual’s view of others and
ethical behavior.
Hypothesis 1b When social consensus regarding the
ethical issue is high, view of self will moderate the rela-
tionship between view of others and ethical behavior such
that a favorable self-image will enhance the positive rela-
tionship between view of others and ethical behavior.
Of course, social consensus is not always high. By defi-
nition, when social consensus is low, widespread disagree-
ment about the ethical course of action exists and therefore
the ethical status of the behavior isnot obvious. In these kinds
of situations, often referred to as ethical dilemmas (Weber
1990), the individual cannot rely on a widely-held opinion
about the matter. Instead, the individual must generate his or
her own cognitive conclusions to arrive at a moral decision.

In other words, the individual is more inclined, perhaps even
required, to rely on his or her consequentialistic and/or for-
malistic analyses about the ethical issue. Thus, we argue that
when social consensus regarding an issue is low, conse-
quentialism and formalism will exert direct main effects on
ethical behavior and that view of others will have no sig-
nificant impact on ethical behavior. Specifically, we expect
that when social consensus is low, consequentialism will be
associated with outcome-oriented behaviors: behaviors that
most effectively generate positive outcomes for those
involved, even if those behaviors violate well-established
rules of conduct. In contrast, we expect that when social
consensus is low, formalism will be most closely associated
with means-based behaviors: behaviors that demonstrate
adherence with moral rules, values and forms of ethical
conduct, even if the actions do not involve positive outcomes
for those involved or if those behaviors generate generally or
personally negative outcomes. These arguments are sum-
marized as follows:
Hypothesis 2a When social consensus regarding the
ethical issue is low, consequentialism will be positively
associated with more outcome-oriented ethical behaviors.

Hypothesis 2b When social consensus regarding the
ethical issue is low, formalism will be positively associated
with more means-based ethical behaviors.
Though we have argued that view of others will not have
an effect on ethical behavior when social consensus is low,
theory and empirical evidence suggest that an individual’s
view of self still plays an important role in this process.
Previous research has documented that individuals often
fail to see an ethical judgment through to ethical behavior
(Reynolds and Ceranic 2007), but a favorable self-image
implies self-confidence to hold on firmly to ethical judg-
ments even in the face of external resistance. Thus, we
suggest that as an individual’s view of self becomes more
positive, the likelihood that he/she will engage in behavior
consistent with his or her ethical judgment will also
increase. These arguments are summarized below, and all
of our hypotheses are illustrated in Figs. 1 and 2:
Hypothesis 2c When social consensus regarding the
ethical behavior is low, view of self will moderate the
relationship between consequentialism and ethical behav-
ior such that a favorable self image will enhance the

positive relationship between consequentialism and out-
come-oriented ethical behavior.
Consequentialism
Formalism
View of Others
View of Self
Ethical Behavior
Fig. 1 The influence of cognitive and interpersonal factors on
ethical
behavior when social consensus is high
470 L. S. Albert et al.
123
Hypothesis 2d When social consensus regarding the
ethical behavior is low, view of self will moderate the
relationship between formalism and ethical behavior such
that a favorable self-image will enhance the positive rela-
tionship between formalism and means-based ethical
behavior.
In the following section, we report three studies that
tested these hypotheses. In the first study, we used multiple

measures of ethical behavior to repeatedly explore the
effects of social consensus, view of others, view of self,
consequentialism, and formalism on ethical behavior. In
the second study, we extended the generalizability of these
results by testing our hypotheses with a consumer measure
of ethical behavior and a different sample. In the third
study, we used a within-subjects design to test these
effects.
Study 1: Method
Sample and Procedure
The sample for the study consisted of 430 individuals
holding managerial positions in different organizations on
the West Coast of the United States. The participants
were recruited from an email list of individuals interested
in receiving online survey announcements maintained by
the work-life office and the school of business of a large
university. With the help of list administrators, we sent a
recruitment email to the group of managers inviting them
to participate anonymously. After participants confirmed
their interest in participating, they received the self-
administered questionnaire package in the mail. Of the

430 employees who received the package, 383 completed
and returned the questionnaires. Of these, 26 question-
naires were excluded from the analyses due to significant
levels of incomplete data or unclear responses. Of the 357
participants in the final sample (83 %), 160 were women
and 197 were men. Sixty two percent (221) indicated that
they were Caucasian, 15 % (54) indicated that they were
Asian, 10 % (36) indicated they were African-American,
and 13 % (46) indicated other ethnicities. Most of the
respondents (56 %) were between 31 and 50 years old,
33 % were younger than 30 years old and 11 % were
more than 50 years old. Each of the participants received
a $5 gift certificate from a retailer for participating in the
study.
Measures
Ethical Behaviors of High and Low Social Consensus
In their review, Treviño et al. (2006) recognized that the
literature has conceptualized ethical behavior in multiple
ways. Generally speaking, some measures of ethical
behavior focus on the individual’s meeting or failing to
meet minimal ethical standards (e.g., stealing, being hon-

est), whereas others have focused on behaviors that exceed
ethical minimums (e.g., charitable giving). In an effort to
capture this variance of social consensus and to provide the
most rigorous tests of our hypotheses, we utilized five
distinct measures of ethical behavior.
To begin, we focused on charitable giving as a measure
of ethical behavior high in social consensus (Reynolds and
Ceranic 2007). We measured charitable giving with three
items. Participants responded on a four-point scale
(1 = never, 4 = many times) to indicate how often they
had volunteered for a good cause (homeless shelters),
donated non-money items (clothes, food, etc.), and donated
money to a charity. The reliability for the three items was
.84.
As a second measure of ethical behavior high in social
consensus, we utilized a segment of Newstrom and Ruch’s
(1975) scale of workplace behaviors. The widely-used
measure (e.g., Ferrell and Weaver 1978; Kidwell et al.
1987; Peterson 2002; Treviño et al. 1998; Weaver and
Treviño 1999) asks respondents to indicate on a Likert type
scale (1 = never, 7 = frequently) the extent to which they
have engaged in 17 different behaviors. Previous research

has consistently demonstrated that four of these items load
on a factor representing behaviors perceived to be overt
unethical behaviors (high social consensus) in which
Consequentialism
Formalism
View of Others
View of Self
Ethical Behavior
Fig. 2 The influence of cognitive and interpersonal factors on
ethical
behavior when social consensus is low
When social consensus is low, what constitutes ethical behavior
is
unclear. In this case, we are arguing that when social consensus
is
low, consequentialism will be associated with more outcome-
oriented
forms of ethical behavior and formalism will be associated with
more
means-based forms of ethical behavior
Turning Inward or Focusing Out? 471
123
managers are least likely to engage (Ferrell and Weaver

1978; George et al. 1999; McCabe et al. 2006). These four
behaviors are: (a) Passing blame for errors to an innocent
co-worker, (b) Claiming credit for someone else’s work,
(c) Falsifying time/quality/quantity reports, (d) Padding an
expense account of more than 10 %. To confirm the
reported findings, we conducted principal component
analysis with varimax rotation. Our analysis revealed two
distinct factors: the first consisted of the four items men-
tioned above (eigenvalue = 2.60, 15.29 % of the variance;
a = .82) and the second consisted of the remaining thirteen
items (eigenvalue = 8.66, 50.95 % of the variance;
a = .95). We used the four behaviors to measure unethical
behaviors of high social consensus.
As final measures of high social consensus ethical
behaviors, we developed two vignettes. The vignettes
described a decision-making situation related to an ethical
issue and were listed with a series of other business-related
vignettes. The first focused on a situation of claiming
credit for a colleague’s work and the second focused on
illegal bribery. For each vignette, four alternative respon-
ses were provided that ranged from what was determined
to be the most unethical to the most ethical choice. The

single-response format reduced competing preferences to a
single scalable behavior. We recognize that vignettes such
as these elicit intentions to behave and are less desirable
than direct measures of behavior. Nevertheless, as Weber
(1990) has noted, vignettes provide a valuable complement
to more direct behavioral measures. We computed the
mean value of the responses to the two vignettes (a = .72),
and utilized this measure to provide a more complete test
of our hypotheses.
We employed two measures of ethical behavior low in
social consensus. The first was comprised of the 13
remaining items from Newstrom and Ruch’s (1975) scale.
These 13 items reflected less egregious workplace behav-
iors such as ‘‘Calling in sick to take a day off’’ and ‘‘Using
company services for personal needs’’. In each case, the
items describe behaviors that involve achieving personal
short-term gain while violating both formal and informal
rules of conduct. Thus, we considered Newstrom and
Ruch’s measures of unethical (and ethical) behavior to be
proxy measures of outcome-oriented (and means-based)
behaviors. While we recognize that alternative conse-
quentialistic (and formalistic) analyses could lead to

opposite conclusions, we consider such interpretations to
be far less common and therefore inferior representations
of these constructs.
As a second measure of an ethical behavior low in social
consensus, we included a vignette developed by Reynolds
and Ceranic (2007), patterned after vignettes used in prior
research on consequentialism and formalism (e.g., Brady
and Wheeler 1996; Fritzsche and Becker 1984). It involved
a situation where the manager faces an ethical dilemma
regarding giving an intern a day off, and had four alter-
native responses that represented a continuum of behaviors
ranging from a highly outcome-oriented option to a highly
means-based option. The presentation of the dependent
variable measures was randomized.
To test the validity of our claims about the social con-
sensus levels of these dependent variables, we used a
separate sample of 103 managers working in the informa-
tion technology industry (age: M = 45, SD = 10.5; tenure:
M = 11 years, SD = 10.5, 43 % male). They were pre-
sented the three charitable behaviors, the behaviors from
Newstrom and Ruch’s (1975) scale, and the three vignettes
described earlier. Items asked to what extent they believed

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