The Moral Disillusionment Model of Organizational Transgressions: Ethical Transgressions Trigger More Negative Reactions from Consumers When Committed by Nonprofits

Abstract

We tested whether the impact of an organizational transgression on consumer sentiment differs depending on whether the organization is a nonprofit. Competing hypotheses were tested: (1) that people expect higher ethical standards from a nonprofit than a commercial organization, and so having this expectation violated generates a harsher response (the moral disillusionment hypothesis) and (2) that a nonprofit’s reputation as a moral entity buffers it against the negative consequences of transgressions (the moral insurance hypothesis). In three experiments (collective N = 1372) participants were told that an organization had engaged in fraud (Study 1), exploitation of women (Study 2), or unethical labor practices (Study 3). Consistent with the moral disillusionment hypothesis, decreases in consumer trust post-transgression were greater when the organization was described as nonprofit (compared to a commercial entity), an effect that was mediated by expectancy violations. This drop in trust then flowed through to consumer intentions (Study 1) and consumer word of mouth intentions (Studies 2 and 3). No support was found for the moral insurance hypothesis. Results confirm that nonprofits are penalized more harshly than commercial organizations when they breach consumer trust.

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Notes

  1. 1.

    A fifth item from the original scale—“This company keeps promises”—was not seen to be a good fit for the current context and so was not included in the current studies.

  2. 2.

    The results of these analyses do not change when controlling for age, sex, and online spending. In Studies 2 and 3, we also measured these demographic variables, and again the effects of organization type remained the same regardless of whether or not we controlled for these variables. Consequently, all the analyses reported in this manuscript were conducted without controlling for demographics.

  3. 3.

    Although it is sometimes assumed that difference scores are a sub-optimal way of capturing change scores for regressions, the premise for this rule of thumb is that it is important to control for regression toward the mean, and associated spurious negative correlations. However, it has been established that for a simple experimental design such as the one used here, the most appropriate approach is usually to take the difference between pre- and post-transgression scores, and to treat that as the criterion variable (as elaborated by Allison 1990, the conventional approach of predicting post-transgression scores while controlling for pre-transgression scores “leads to inferences that are intuitively false”, p. 93).

  4. 4.

    It should be noted that the model was also significant when word of mouth intentions was replaced with consumer intentions, b = 0.11, SE = 0.02, 95%CI[0.065, 0.151]. This model should be interpreted with caution, however: although the indirect pathway is significant, lending support for the moral disillusionment model, it is important to remember that the direct effect of Organizational Type on the decline in consumer intentions pre- versus post-transgression was non-significant.

  5. 5.

    As for Study 2, the model was also significant when word of mouth intentions was replaced with consumer intentions, b = 0.75, SE = 0.11, 95% CI [0.539, − 0.988]. Interpretation of this model carries the same caveats as described in Footnote 4, given that the direct effect of Organizational Type on the decline in consumer intentions pre- versus post-transgression was non-significant.

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Hornsey, M.J., Chapman, C.M., Mangan, H. et al. The Moral Disillusionment Model of Organizational Transgressions: Ethical Transgressions Trigger More Negative Reactions from Consumers When Committed by Nonprofits. J Bus Ethics (2020). https://doi.org/10.1007/s10551-020-04492-7

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Keywords

  • Nonprofit
  • Charity
  • Trust breach
  • Ethical behavior
  • Social enterprise