Organizations Appear More Unethical than Individuals

Abstract

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

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Notes

  1. 1.

    In Sample A, this effect remained statistically significant (F(1, 718) = 12.71, p < .001) when we created a second model accounting for the main and interactive effects of participants’ countries. In addition, this model revealed no interaction between the agent manipulation and the country participants were from, F(5, 718) = 0.28, p = .923, suggesting that participants’ judgments across the six countries were relatively similar. However, this model did indicate a significant main effect of participants’ country in and of itself, F(5, 718) = 17.66, p < .001, suggesting that culture influenced how broadly unethical participants believed the actions were. Participants from South Korea believed the actions were least unethical (M = 3.39a, SD = 0.79), followed by India (M = 3.65ab, SD = 0.89), Sweden (M = 3.67b, SD = 0.69), the UK (M = 3.86bc, SD = 0.73), the Philippines (M = 4.05d, SD = 0.75), and finally Australia (M = 4.14d, SD = 0.64). A Tukey HSD post hoc test revealed that country means that do not share a subscript differed significantly, ps < .05. When combining these datasets in order to compare Americans (0) to non-Americans (1), we did not observe a significant interaction (F1, 941) = .753, p = .386), suggesting that American participants’ judgments did not differ meaningfully from non-American participants’ judgments, although the observed effect size was indeed larger in the American sample (d = .57) compared to the international sample (d = .26).

  2. 2.

    We conducted this experiment before the “Equifax” breach in 2017 where hackers stole millions of Americans’ identifying information from a large organization.

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Correspondence to Arthur S. Jago.

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Conflict of interest

All authors declare that they have no conflict of interest.

Ethical Approval

This article does not contain any studies with animals performed by any of the authors. All procedures performed in studies involving human participants were in accordance with the ethical standards of an institutional a research committee and with the 1964 Declaration of Helsinki and its later amendments or comparable ethical standards. Informed consent was obtained from all individual participants in these experiments.

Appendix

Appendix

Experiment 1

Breaking fruit import laws and accidentally importing a parasite.

Misrepresenting the truth in order to sell something.

Refusing to pay a contractor an agreed-upon amount.

Lying about a rival online.

Making noise using machinery after legal quiet hours.

Negligently polluting a local stream.

Avoiding taxes.

Improperly storing toxic chemicals.

Stealing intellectual property.

Accidentally disfiguring a public sidewalk.

Experiment 2

On October 15, 2014, it was found that Bill [NatCo] had broken a number of fruit import laws in California. As a result of breaking these laws, a new strain of parasite that affected fruit trees was released into one local community, endangering plant life and orchards.

On October 2, 2014, Bill [NatCo] sold a property to a small restaurant business in Santa Clara, CA. The couple that purchased the property soon learned that it had a moderate termite problem that would cost a significant amount to fix. No communication from Bill [NatCo] indicated this termite problem to the couple prior to the sale.

On August 29, 2014, Bill [NatCo] hired a plumber—Nancy—to do substantial plumbing work. Upon completion, Bill [NatCo] refused to pay Nancy the agreed-upon price, $1000, instead paying her only $250. Nancy believes that Bill [NatCo] was totally satisfied with the contract work and simply wanted to get away with giving her less money.

On October 8, 2014, it was found that Bill [NatCo] had lied about a catering service, QuickCuisine, on an online review site. Specifically, Bill [NatCo] said that QuickCuisine charged 2 times as much as advertised for a catered event, when in fact, they hadn’t. QuickCuisine said in response that they had many disagreements with Bill [NatCo] in planning the event, and that Bill [NatCo] maybe had lied to make them look worse.

In mid-October, 2014, Bill [NatCo] ran loud machinery near a residential area. Normal hours for work are generally 9AM to 5PM, but Bill [NatCo] ran this loud machinery starting around 7:30AM until 7PM or so every night for approximately two work weeks. A number of residents expressed concerns about this noise pollution, saying that Bill [NatCo] was being negligent toward the community.

Experiments 3a and 3b

On March 14, 2015, a person [business] in Santa Clara County, CA, dumped 10 gallons of crop insecticide into a local lake. Local news agencies speculated that this type of dumping could easily adversely affect both the wildlife in the lake and in the surrounding area.

On March 29, 2015, a person [business] in Santa Clara County, CA, improperly installed a heating unit in a manner that violated local safety laws and ordinances.

On May 17, 2015, a person [business] in Marin County, CA, violated California agriculture laws by experimenting with a non-FDA approved pesticide on approximately one half acre of land.

On June 1, 2015, a person [business] in Santa Clara County, CA, reneged on a contract with a local homeowner. The person [business] previously signed a contract to renovate the homeowner’s kitchen, but broke that contract in order to pursue a more profitable project elsewhere.

On April 4, 2015, a person [business] in Santa Clara County, CA, changed legal residence to another state. However, the person [business] didn’t actually move and stayed in the same place. This reclassification, given many circumstances, allowed the person [business] to avoid approximately $10,000 in taxes.

Experiment 4

On March 14, 2015, Steve [Stuza] used an organic pesticide on 250 square feet of farmland. Local news agencies reported that this pesticide, while harmless to the environment, produced an extremely unpleasant odor for 3–4 days that bothered people.

However, further investigation revealed that Steve [Stuza] was given the wrong pesticide by a supplier, and couldn’t have possibly known it would bother people. The supplier claimed responsibility and apologized for the incident.

However, further investigation revealed that only two people were negatively impacted by this unpleasant odor, due to the extremely remote location of the plot.

Experiment 5

On April 21, 2015, a business [employee working for a business] in San Mateo County, CA, accidentally left a machine on overnight that can normally operate only for an hour or two at a time. Doing so ultimately resulted in a fire, which caused moderate damage to a neighboring property.

On April 04, 2015, a business [employee working for a business] in San Mateo County, CA, lost approximately sixty employee time cards. While repairable, this error resulted in the workers not being paid for their normal work or any overtime for approximately 4 weeks.

On February 11, 2015, a business [employee working for a business] in Marin County, CA, improperly stored customer data, which resulted in approximately fifty customers’ names and email addresses being posted publicly to the internet.

On April 22, 2015, a business [employee working for a business] in Santa Clara County, CA, was found to have been claiming that certain food items on a menu were “organic” when they actually were not, according to USDA standards.

On February 2, 2015, a business [employee working for a business] in San Mateo County, CA, refused to refund a customer for a large purchase of fruit that turned out to be infected by a number of parasites. The customer had no way of knowing that the fruit was infected.

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Jago, A.S., Pfeffer, J. Organizations Appear More Unethical than Individuals. J Bus Ethics 160, 71–87 (2019). https://doi.org/10.1007/s10551-018-3811-8

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Keywords

  • Corporate personhood
  • Punishment
  • Organizations