The Managerial Relevance of Ethical Efficacy

Abstract

Being ethical is argued to be paramount for effective organizational functioning (Altman, 2005). Lately, however, it seems lost in a sea of corporate scandals and unethical business practices (e.g., WorldCom, Enron, Fannie Mae). Conventional economic wisdom suggests that being ethical produces too great of a burden on organizational agents because individuals are motivated by self-interest and swayed by market forces and competitive pressures (cf. Altman, 2005). In a context where innovation, risk-taking, and motivation for personal economic gain are the coinage of successful free enterprise, ethical considerations take a backseat. Consistent with this view, recent research suggests shady business practices have been downgraded to “efficient corruption” and justified by bottom-line tactics (Argandoña, 2005; Fisman & Svensson, 2007; Mobley & Humphreys, 2006).

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