EXECUTIVE DEVELOPMENT: CORPORATE RESPONSE TO BUSINESS ETHICS

ABSTRACT. This article reports the results of a survey of human resource management professionals regarding the focus on ethical decision-making in executive development programs in the United States. One hundred fifty-five responses were analyzed. The results indicated that there was only moderate emphasis given to ethical issues in executive development programs. There were no differences in the level of emphasis on ethical decision-making among lower, middle, and senior levels of management. Further, the level of emphasis on ethical decision-making was unaffected by the strategy employed by the corporation, the firm's position in the corporate life cycle, or the size of the business (number of employees).

The role of ethics in business is currently under much discussion (Cook, 1988; Harrington, 1991; Thibodeaux & Powell, 1985), as is the relationship between training and ethics (Hosmer & Steneck, 1989; George, 1987). Many have questioned the validity of the assumption that ethics can be taught (e.g., Arthur, 1984; Klein, 1985; Lee, 1986). Of serious interest is the question of where best to teach ethics. Some contend that the business school is not equipped to respond to this demand. Others feel that the role of the business school is an essential element in the equation (Chief Executive, 1990; Petrick, Wagley, & Von der Embse, 1991).

However, there seems to be consensus that the public perception of ethics in business is negative. That judgment may in part be a result of what is reported in the popular press, which is filled with examples of unethical behavior in business. This skeptical attitude toward business ethics is of serious concern to those who teach business students. If we can assume that ethics and business are not antithetical (Arthur, 1984), the question of how to include ethics in business education becomes important. It is equally important to ensure that the chosen approach will, in fact, have a positive impact on businesses and the people who manage them. Some have questioned whether this is possible (Purcell, 1977).

Arthur (1984) defines business ethics as applied ethics. This definition does not necessarily include the field of situational ethics, in which the situation dictates the response, but rather recognizes the inherent realism of the business world. This realistic approach recognizes that organizations operate in real time in the real world; therefore, the ethics of business can best be viewed in that context. Some make the argument for centrality of ethics (Brady, 1990). The view that managers have power and therefore a potential for good or evil managerial decision-making has a fundamental link to ethics. In general, managers' decisions affect peoples' lives and well-being, determine "fair" resource allocation, and implement and interpret organizational rules and policies.

One major question for those concerned with business ethics is where best to develop an ethical foundation for application in a real-world setting; in school prior to actual experiences in the business world, or after graduation as applied ethics on the job? If one follows Arthur's (1984) reasoning that business ethics is applied ethics, the use of executive training or development programs may be the best method for addressing this need. An important question to ask is whether businesses are in fact addressing this need. What better place to conduct applied training but in the actual setting in which the business person operates? Following this logic, training in the area of ethical decision-making should then be conducted within the context of an organization's management development program. As noted by Guerrette (1988), incorporating an ethics component into the management development program makes it more likely that ethical considerations will become relevant in managerial decision-making.

It is likely, however, that the emphasis on ethical decision-making in management development may vary in relation to the hierarchical level of the managers. For example, as managers move up the hierarchy, their decisions typically have far greater consequences and ethical ramifications. Consequently, it seems that greater attention would be devoted to ethical considerations as one moves up the hierarchy.

Additionally, it is possible that the extent to which organizations focus on ethical decision-making in management development would be related to the size of the organization. Though this may not be as compelling a criterion for differentiation as management level, it still is a legitimate basis for evaluating the perceptions of the respondents. The size of the firm should have an impact on the level and breadth of effect that the firm has on society and the surrounding environment, if only in terms of employment practices. These variations should in turn result in differing views of how and to what purpose ethical issues affect the organization. Relative to small firms, larger firms have the potential for greater impact, both beneficial and detrimental, on society. Therefore, larger firms are not only likely to have greater resources to devote to management development activities but are also more likely to consider them necessary.

The strategic orientation of the firm should be expected to influence the firm's perception of the ethical issues with which it is confronted. Whether the firm views itself in a strategy of growth, stability, or retrenchment within its environs should affect its view of reality. Firms following a growth rather than stability or retrenchment strategy may be more likely to devote more resources to management recruitment. For example, a firm that has a growth strategy, rather than a stability or retrenchment strategy, should experience moderately high financial risk, multiple demands, and conflicting priorities on resources, shifting power bases, and generally, insufficient resources to satisfy all demands. A firm that actively pursues stability in a stable environment usually focuses on cost effectiveness, management development and succession, and overall efficiency with minimum cash outlay. Finally, a firm in a retrenchment environment is faced with time pressures for results, the need for rapid assessment and decision-making, eroded morale and low infrastructure cohesion, strained relationship with suppliers and customers, and limited resources. Accordingly, the strategy the firm is pursuing is likely to be r elated to its emphasis on ethical decision-making in management development activities.

As with organizational strategy, one should expect the stage in the corporate life cycle, whether the organization is prospering or declining, to be related to the extent of focus on ethical decision-making. Life cycle as well as strategic orientation should reflect some level of commitment to ethical policies in the organization's political actions with the external environment. This is because the firm experiences different competitive positions as it moves through the life cycle. In the growth phase, the firm pushes for market share usually in selected market niches and tries to improve that share. In stability, the firm tries to maintain its position, usually with great effort. Maintenance and protection of market share are key areas of emphasis. In decline, issues of phased withdrawal and harvesting the "most" out of the business are primary concerns. Each stage may have its own ethical interests. For example, organizations in the decline stage of the corporate life cycle are likely to devote far more time and energy to short-term issues concerning their decline than to long-term issues such as ethical decision-making.

Accordingly, our purpose in this article is to present our findings on the extent to which organizations focus on ethical decision-making in their management development activities and programs. Further, the relationship between management development focus on ethical decision-making and management level, organization size, corporate strategy, and stage in the corporate life cycle are examined.

Method

Sample

Questionnaires were mailed to a random sample of the human resource managers of 600 corporations obtained from Standard and Poor's Directory of Companies. Each survey was personally addressed to the vice-president or director of human resources, personnel, or human relations.

Two follow-up mailings were conducted in addition to the original mailing. A total of 155 completed questionnaires (101 from the first mailing, 28 from the second mailing, and 26 from the third mailing) were returned, a response rate of 26%. A comparison of geographic distribution based on ZIP codes did not indicate any difference between respondents and non-respondents, Chi square (8,N = 155) = 12.16. Finally, a one-way analysis of variance (ANOVA) indicated that there were no differences in the responses to the measure of extent of focus on ethical decision-making among the three mailings, F(2,139) = .06, p = .94

The respondent organizations ranged in size from 60 to over 200,000 employees, with a median of 1,500. We determined the organization's strategy by asking the respondent to indicate whether the organization was pursuing a growth, stability, or retrenchment strategy (e.g., Bartol & Martin, 1991; Certo & Peter, 1991; Rue & Holland, 1989). This grand strategy classification was used because the terms are well known and therefore easily understood. The need to determine strategic orientation rather than short-run market strategies is important because of the implied long-term effects of decision-making under the different corporate environments. Fifty-four percent (84) of the respondents indicated that their organizations were pursuing a growth strategy, 28.3870 (44) indicated a stability strategy, and 17.6% (27) indicated a retrenchment strategy.

The organization's position in the corporate life cycle was determined by the respondent's self-report, indicating either growth, stability, or decline. Thirty-nine percent (59) indicated that they were in the growth stage, 43% (64) indicated that they were in the stability stage, and 18% (27) indicated that they were in the decline stage.

Measures

Our study was designed to assess the values and methods that organizations employ in the process of developing their executives. As part of a larger study, one of the nine focus areas we asked about was the extent to which development programs address ethics in decision-making. We asked the respondents to indicate the extent of focus on ethics for the lower, middle, and senior levels of management, each ranked on a Likert scale ranging from not at all (1) to to a great extent (7). Ethical decision-making was defined for the respondents as "a focus on internal or external standards or codes of conduct used to govern the behavior of individuals or groups." The responses were measured on a 7-point scale anchored from not at all (1) to to a great extent (7).

Results

In Table 1, we summarize the responses to the item about the extent of focus on ethical decision-making. Two items are of particular interest. First, the distribution of responses was extremely dispersed, and the means were all less than 4, the midpoint of the scale. Second, there were no discernible differences among the three levels of management, either in the gross distribution or in the means. A one-way ANOVA indicated no statistically significant differences, F (2,410) = .27, p = .76, for the ethical decision-making focus among the three levels of management.

The relationship between the focus on ethical decision-making at each level of management and firm size was examined with correlations; at each of the three levels of management, the correlations were not significant. For lower level managers, r = .07, p = .41; for the middle level managers, r = .05, p = .54; and for senior level managers, r = .03, p = .75.

Using ANOVA, we examined the potential effects of corporate strategy on the focus on ethical decision-making. The effects of corporate strategy on the focus on ethical decision-making for lower level managers were not significant, F (2,137) = 2.18, p = .116. The results were similar for mid-level managers, F (2,137) = 2.76, p = .0665, and senior level managers, F (2,137) = 1.97, p = .143. Although not statistically significant, the direction of the means is suggestive. For example, at the middle management level there was more emphasis on ethical decision-making by firms with a growth strategy (M = 3.93) than among those with either a stability strategy (M = 3.45) or a retrenchment strategy (M = 2.85).

Using ANOVA, we examined the potential effects of stage in the corporate life cycle on the focus on ethical decision-making. The effects of life cycle on the focus on ethical decision-making for lower level managers were not significant, F (2,136) = .98, p = .377. The results were similar for middle level managers, F (2,136) = 1.35, p = .263, and senior level managers, F (2,136) = 2.13, p = .123.

Discussion

Given the emphasis and concern for business ethics expressed in the media by businesses and nonbusiness proponents, the below-average treatment of ethical decision-making as a major focus in executive development programs in the United States is surprising. These findings are consistent with the findings of Saari, Johnson, McLaughlin, and Zimmerle's (1988) study of 611 organizations in which the majority of the respondents indicated that more attention should be devoted to the ethics content area in future management development training. Although this lack of concern may not be an explicit reflection of corporate attitudes toward business ethics, it does indicate how far corporations have yet to go in operationalizing their verbal support of business ethics with concrete backing. Commitment to executive development programs that focus on truly important and contemporary ethical issues requires an investment of time and money that U.S. businesses seem unwilling to commit. Given the intense competition faced by many U.S. firms today, perhaps ethics is a lower priority than factors that may more immediately affect an organization's profitability and ultimately its survival.

Negligence regarding ethics is manifested in the lack of focus among the levels of management with regard to ethical decision-making. It should be readily apparent that the different levels of management face different ethical issues as well. For example, at the corporate level, decisions involve ethical issues such as production of hazardous products, mergers that create monopolistic market effects, and plant relocations that shift incomes for entire communities. At the middle level, ethics permeate competitive market practices and fair resource allocations. At the lower level of management, ethical issues concern individual and interpersonal relations, especially as they relate to decisions concerning subordinate evaluation, review, reward, adhering to chain of command, and even setting a "good" example. It may therefore be expected that the responses to focus on ethical decision-making in managerial development programs would be distinct on a content basis and that the extent of focus would be similarly different. The results of our study do not support this assertion. There were no differences in the extent of focus on ethical decision-making among the three levels of management.

Neither the size of the organization nor strategic orientation of the firm was related to the extent of focus on ethical decision-making in management development programs. Perhaps this lack of a relationship resulted from the limited focus on ethical decision-making reported in this study. This limited focus may have artificially restricted the range of responses and subsequently the size of the correlation. The size of a firm should influence an organization's "social responsibility" role. A large firm with several thousand employees and presumably extant service or product interaction with consumers should experience regular and more visible decision-making that involves ethics.

We also expected strategic orientation to produce some difference in the extent to which firms focus on ethics in decision-making. Although it seems logical that the level of attention devoted to this topic by firms with growth strategies and firms with retrenchment strategies might differ, the results did not support this hypothesis. One possible explanation for our finding is that responses were based on self-reports and perhaps the individual respondents did not fully appreciate the strategic orientation of the firm. Also, firms may pursue a number of strategies concurrently, and our measure may have failed to capture this possibility.

As with all other attempts to determine differences in perception, the stage of corporate life cycle also failed to produce any differences among firms regarding their focus on ethical decision-making in management development programs. Possibly, the stages in the corporate life cycle were too simplistic and thus were not able to capture the complexity of the situation.

As much as ethical decision-making has been discussed in the literature, one would expect to see a commitment from corporate America to respond to this increasing concern from government and the public in general. In the context of product-related environmental hazards, basic honesty in the implementation of policy, and international business operations, where values differ across cultures, the implications for ethical integrity are overwhelming. Yet, the executives surveyed in this study seem to have indicated through their responses a moderately low priority for the focus on ethics training in the corporation. They may have assumed, as have many others, that the responsibility for ethical training rests with the parents of future business persons. Or they may have felt that business schools, in which future corporate leaders supposedly develop their business acumen, are a more appropriate vehicle for ethics training. Finally, they may have concluded that ethics cannot or should not be taught (Goodpaster & Mathews, 1981). Perhaps future research should address this question.

The limitations of this study should be addressed and considered when weighing the results. First, the sample was small and limited to organizations having formal executive development programs. Second, given the time and cost constraints, many follow-up questions specifically addressing the reasons for or foundations of the responses were excluded. Third, the use of a mailed questionnaire may have limited the response rate and the completeness of responses. For instance, vice-presidents and directors of human resource personnel departments are inundated daily with information and data requests; an open-ended interview format might be more appropriate for such a population.

In conclusion, the results of this preliminary study indicate the lack of a focus on ethics in the development of managers. We have identified possible follow-up topics for further research that could be useful in addressing this situation.

TABLE 1. Focus of Ethical decision-making Training for Various Levels of Management

Response      Lower level           Midlevel
level      No.           %     No.            %

1          32           21.6   30           20.8
2          20           13.5   17           11.8
3          21           14.2   22           15.3
4          27           18.2   23           16.0
5          21           14.2   22           15.3
6          16           10.8   19           13.2
7          11            7.4   11            7.6

  M              3.52                3.52
  SD             1.90                1.90

Response      Senior level
level      No.            %

1          35           24.5
2          22           15.4
3          13            9.1
4          16           11.2
5          19           13.3
6          22           15.4
7          16           11.2

  M              3.52
  SD             1.90

Note. Response levels ranked on a scale ranging from 1 (not at
all) to (to a great extent).

REFERENCES

Arthur, H. B. (1984). Making business ethics useful. Strategic Management Journal, May, 319-333.

Cook, M. F. (1988). What's ahead in human resources? Management Review, April, 41-44.

Bartol, K. M., & Martin, D. C. (1991). Management. New York: McGraw-Hill.

Brady, F. N. (1990). Ethical managing: Rules and results. New York: Macmillan.

Certo, S. C., & Peter, J. P. (1991). Strategic management: Concepts and applications. New York: McGraw-Hill.

Chief Executive. (1990). How can business fix the education mess? March, 54-70.

George, R. J. (1987). Teaching business ethics: Is there a gap between rhetoric and reality? Journal of Business Ethics, 6, 513-518.

Coodpaster, K. E., & Mathews, J. B., Jr. (1981). Can a corporation have a conscience? Harvard Business Review, 60(1), 132-141.

Guerrette, R. H. (1988). Corporate ethical consulting: Developing management strategies for corporate ethics. Journal of Business Ethics, 7, 373-380.

Harrington, S. J. (1991). What corporate America is teaching about ethics. Academy of Management Executive, 5, 21-30.

Hosmer, L. T., & Steneck, N. H. (1989). Teaching business ethics: The use of films and videos. Journal of Business Ethics, 8, 929-936.

Klein, S. (1985). Two views of business ethics: A popular philosophical approach and a value based interdisciplinary one. Journal of Business Ethics, April, 71-79.

Lee, C. (1986). Ethics training: Facing the tough questions. Training, March, 31-41.

Petrick, J. A., Wagley, R. A., & Von der Embse, T. J. (1991). Structured ethical decision-making: Improving the prospects of managerial success in business. SAM Advanced Management Journal, 56, 28-34.

Purcell, T. V. (1977). Do courses in business ethics pay off? California Management Review, Summer, 50-58.

Rue, L. W., & Holland, P. G. (1989). Strategic management: Concepts and experiences. New York: McGraw-Hill.

Saari, L. M., Johnson, T. R., McLaughlin, S. D., & Zimmerle, D. M. (1988). A survey of management training and education practices in U.S. companies. Personnel Psychology, 41, 731-743.

Thibodeaux, M. S., & Powell, J. D. (1985). Exploitation: Ethical problem of organizational power. SAM Advanced Management Journal, Spring, 42-44.

~~~~~~~~

By GERALD L. BLAKELY and CINDY LEE MARTINEC, West Virginia University Morgantown, West Virginia