Ethical Climate

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Academy of Management Perspectives

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Ethical Climates and Their Effects on Organizational
Outcomes: Implications From the Past and
Prophecies for the Future
by Aditya Simha and John B. Cullen

Executive Overview
Ethical climate theory was first proposed by Victor and Cullen (1987, 1988). Ever since, it has been useful
in increasing our knowledge on a variety of organizational outcomes such as workplace bullying, organizational commitment, ethical behavior, job satisfaction, and turnover intentions. In this paper, we
scrutinize the extant research on ethical climates to provide an understanding of what has been observed
thus far, and what else ethical climate theory could be hamessed to examine. We also provide a critique
of the ethical climate theory literature base and suggest a future research agenda for ethical climate theory.

F

irst proposed by Victor and Culleri (1987, 1988),
ethical climate theory (ECT) was initially conceptualized as an analytic tool for understanding
organizational normative systems. There was an urgent need at that time to develop such a tool (Victor
& Cullen, 1988), stemming from the then-nascent
belief that organizations were social actors and consequently responsible for the ethical or unethical
behaviors of their employees.
Organizational work climates (Schneider,
1983) comprise the base upon which ECT was
established. An organizational work climate is defined as the shared perceptions of procedures, policies, and practices, both formal and informal, of
the organization (Reichers &. Schneider, 1990;
Schneider, 1975, 1983). There are many work
climates: innovation climates (e.g., Agrell &
Gustafson, 1994; Klein &. Sorra, 1996), creativity
climates (e.g., Gilson &. Shalley, 2004; Mumford,
Scott, Gaddis, &. Strange, 2002), communication
climates (Forward, Czech, & Lee, 2011; Guzley,

1992), warmth and support climates (e.g.. Field &
Abelson, 1982), diversity climates (e.g., McKay,
Avery, &. Morris, 2009), justice climates (e.g.,
Dietz, Robinson, Folger, Baron, &. Schultz, 2003;
Liao &. Rupp, 2005), involvement climates (e.g.,
Chen, Lam, & Zhong, 2007; Richardson &. Vandenberg, 2005), and safety climates (e.g., Hofmann & Mark, 2006; Hofmann & Stetzer, 1998;
Zohar, 2010).
All these different work climates are known to
influence behaviors of organizational actors to a
great degree (Martin &. Cullen, 2006; Tsai &
. Huang, 2008; Wimbush & Shepard, 1994). Ethical climates are a subset of these organizational
work climates and also have a strong influence on
several organizational outcomes. An ethical climate can be defined as the perception of what
constitutes right behavior, and thus becomes a
psychological mechanism through which ethical
issues are managed (Martin &. Cullen, 2006,
p. 177). Ethical climates influence both decision

* Aditya Simha ([email protected]) is an Assistant Professor of Organizational Leadership at Gonzaga University.
John B. Cullen ([email protected]) is a Professor and Huber Chair of Entrepreneurial Studies at Washington State University.
Copyright of the Academy of Monogement, all rights reserved. Contents moy not he copied, emailed, posted to a listserv, or otherwise transmitted without the copyright holder's express written permission.
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http://dx.doi.org/10.546S/amp.20l1.01S6

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Simha and Cullen

making and behavioral responses to ethical dilemmas, which then go on to be reflected in various
work outcomes.
Ethical transgressions at and involving organizations—such as insider trading, embezzlement,
corporate fraud, and workplace bullying—can all
be traced back to the influence of ethical work
climates (Arnaud, 2010), which were at the center of recent ethical scandals at once-respected
organizations such as AIG, Countrywide Financial, Lehman Brothers, and Siemens AG (Arnaud
&. Schminke, in press). The importance of ECT for
both research and practice is underscored when one
examines the different and frequent cases of ethical
transgressions in organizations, especially in light of
the various workplace outcomes influenced by ethical climates (e.g., Bulutlar & Oz, 2009; Fu & Deshpande, 2012; Jaramillo, Mulki, & Boles, in press;
Laratta, 2011; Wang & Hsieh, 2012).
We begin with an overview of the theoretical
background of ECT and then present a detailed
literature review. Next we present our critique of
ECT and provide suggestions for future areas of research that could be explored to further contribute
to ECT.

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tan. They refer to individuals making decisions
based on their own personal beliefs and values, the
organization itself, and the community or society
external to the organization.
The intersections of these two theoretical dimensions of ethical climate result in nine theoretical
climate types (see Figure 1): self-interest, company
profit, efficiency, friendship, team interest, social responsibility, personal morality, company rules and
procedures, and laws and professional codes.
Five Empirically Occurring Ethical
Climate Types
hese nine ethical climates, while theoretically
possible, are not all equally likely to occur.
Empirically, five types of ethical climate occur
most often (Bulutlar & Oz, 2009; Martin & Cullen, 2006; Tsai & Huang, 2008): instrumental,

T

caring, independence, law and code, and rules (see

Figure 2). These empirically occurring types of
ethical climates originate from the nine theoretical climate types and straddle multiple loci of
analysis. For instance, instrumental climates could
be concerned with both self-interest and company
profit.
Ethical Climate Theory
Instrumental climates are associated with the
ictor and Cullen (1987, 1988) developed ECT
egoism construct and the individual and local loci of
by combining Kohlberg's (1984) work on
analysis. As such, employees operating in instrumenmoral development and Schneider's (1983)
tal climates tend to see their organizational unit as
work on sociocultural theories of organization.
having norms and expectations that encourage ethThe original Victor and Cullen (1988) framework
ical decision making from an egoistic perspective.
consists of a two-dimensional model of ethical
Behavior that promotes self-interest is the norm
climate types, considering ethical philosophy and
even to the possible detriment of others.
the sociological theory of reference groups.
Caring climates are associated with the benevThe ethical philosophy dimension includes three
olence construct and the individual and local loci
criteria: egoism, benevolence, and principle. Egoism re- of analysis; employees operating in caring climates
fers to behavior that is concerned chiefly with selfperceive that their decisions are and should be
interest. Benevolence is similar to utilitarianism, in
based on an overarching concern for the wellthat decisions and actions are taken to produce the
being of others. This climate tends to encourage
greatest good for the greatest number of people.
behaviors that yield a positive outcome for the
Principle is similar to deontology, in that decisions
greatest number of constituents.
are made and actions are taken in accordance with
Independence climates are associated with the
laws, rules, codes, and procedures. These three ethprinciple construct and the individual locus of analical criteria compose the ethical philosophy dimenysis; employees believe that they can act on deeply
sion of the ECT framework.
held personal convictions to make ethical decisions.
The sociological theory dimension also in- TTiese climates emphasize personal moral beliefs
cludes three loci: individual, local, and cosmopoli' with minimal regard for external influences.

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Figure 1
Theoretical Strata off Etiiical Climate (Victor & Cullen, 1987,1988)

Locus of Analysis

Egoism

Ethical Theory

Benevolence

Principle

Individual

Local

Cosmopolitan

Self-interest

Company profit

Efficiency

Team interest

Social
responsibility

Company rules
and procedures

Laws and
professional
codes

Friendship

Personal morality

Figure 2
Five Common Empirical Derivatives off Ethical Climate (Victor & Cullen, 1987,1988)

Locus of
Analysis

Ethical Analysis

Individual

Local

Egoism

Instrumental

Instrumental

Benevolence

Caring

Caring

Principle

Independence

Rules

Rules climates are associated with the principle
construct and the local locus of analysis. In these
climates, organizational decisions are perceived as
being guided by a strong and pervasive set of local
rules or standards, such as codes of conduct ( Appelbaum, Deguire, & Lay, 2005; Aquino &. Becker,
2005; Liu, Fellows, & Ng, 2004; Martin & Cullen, 2006).
Law and code climates are associated with the
principle construct and the cosmopolitan locus of

Cosmopolitan

Law and Code

analysis; principled decision making is based on
external codes such as the law, the Bible, or professional codes of conduct.
ECT Literature Review

A

s mentioned above, ECT has been used in a
variety of ways since it was first formulated
and proposed by Victor and Cullen (1987,
1988). Some research studies have examined the
antecedents of ethical climates, but most of the

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Simha and Cullen

literature base on ECT has explored the effects of
ethical climates on organizational outcomes.
Antecedents of Ethical Climates

This segment of the literature base on ECT focuses primarily on external organizational context, organizational structure, and strategic or
managerial orientations. External organizational
context emanates from institutional theory
(DiMaggio & Powell, 1983), and essentially deals
with organizations trying to legitimize themselves
in response to external pressures. Although few
studies investigate how external organizational
contexts and ethical climates interact, one that
does is Bourne and Snead's (1999) exploration of
how community norms and values determine employees' ethical perceptions, and hence determine
the organizational ethical climates. Another such
study by Cullen, Parboteeah, and Hoegl (2004)
investigated how external organizational context
affected ethical decision making. Similarly, Belak
and Mulej (2009) found that ethical climates
change over the life cycle stages of an enterprise.
Another recent study by Weber and Gerde (2011)
found that both organizational role and environmental uncertainty influenced ethical climates in
military units.
The original study by Victor and Cullen (1988)
found that organizational form was a significant
predictor of ethical climate perceptions. They hypothesized that Ouchi's (1980) transaction organizational forms were responsible for encouraging
various types of ethical climates. A study by Wimbush, Shepard, and Markham (1997) also found
that various organizational forms encouraged several kinds of ethical climates. Similarly, Wyld and
Jones (1997) proposed that organizational context
factors were very important in establishing ethical
climates. Stone and Henry (2003) investigated
the development of ethical climates from an information technology (IT) perspective, and found
that IT influenced the development of various
types of ethical climates. Similarly, Jin,
Drozdenko, and Bassett (2007) found that organizational structure in IT organizations affected the
development of ethical climates there.
Several studies have investigated ethical climates in a nonprofit versus profit context (Agar-

23

wal & Malloy, 1999; Agarwal, Malloy, & Rasmussen, 2010; Brower &L Shrader, 2000). This realm
of research has found that nonprofit organizations
tend to encourage different types of ethical climates than do for-profit or government organizations (e.g., Agarwal et al, 2010). A recent study
(Duh, Belak, & Milfelner, 2010) investigated differences between family and nonfamily enterprises
in terms of ethical climates. Kidwell, Kellermanns,
and Eddleston (2012) also studied family firms
and investigated the role of conflict and justice
perceptions in the development of ethical
climates.
Another realm of research exploring the antecedents of ethical climates has focused on strategic and
managerial orientations. One study examined the
relationship between strategic and managerial orientations and ethical work climates (VanSandt,
Shepard, & Zappe, 2006). Another study by Parboteeah, Chen, Lin, Chen, Lee, and Chung (2010)
examined the role of managerial practices in establishing ethical climates, and found that practices
such as communication and empowerment influence ethical climates from a functional perspective.
Several studies have investigated the role of leaders
in establishing ethical climates (Dickson, Smith,
Grojean, & Ehrhart, 2001; Grojean, Resick, Dickson, &. Smith, 2004; Upchurch &. Ruhland; Wimbush &. Shepard, 1994). Leadership orientations
have also been considered as an explanatory variable
for the establishment of ethical climates (Schminke,
Ambrose, & Neubaum, 2005), as have entrepreneurial orientations (Neubaum, Mitchell, &.
Schminke, 2004). Managerial orientations have also
been found to influence organizational actors' perceptions of ethical climates (Martin &. Cullen, 2006;
Schwepker & Hartline, 2005).
Effects of Ethical Climates

Most of the literature base on ethical climates has
concentrated on exploring and investigating the
effects of ethical climates on various organizational outcomes. The key premise behind this
productive realm of research seems to be the realization that perceptions of ethical climates tap
fundamentally important issues that affect people's reactions to work and their organizations
(Martin & Cullen, 2006). However, most of this

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literature has been published in business ethics
journals, especially the Journal of Business Ethics,

even though the outcome variables being investigated are traditional management and organizational behavior variables such as job satisfaction,
organizational commitment, turnover intentions,
ethical behavior, and dysfunctional behaviors.
Job satisfaction is a popular outcome variable
studied by numerous scholars and studies in the
context of ethical climates (e.g., Deshpande,
1996b; Elci & Alpkan, 2009; Goldman & Tabak,
2010; Joseph & Deshpande, 1997; Koh & Boo,
2001; Martin & Cullen, 2006; Tsai & Huang,
2008; Wang & Hsieh, 2012; Woodbine, 2006).
This construct has been studied in a variety of
contexts, including differing countries, employees,
and industries. An early study by Deshpande
(1996b) investigated the impact of ethical climate
types on facets of job satisfaction, such as pay
satisfaction, promotion satisfaction, coworker satisfaction, supervisor satisfaction, work satisfaction,
and overall job satisfaction. He found that with
the exception of pay satisfaction, ethical climates
were associated with all other measures of
satisfaction.
Another study by Joseph and Deshpande
(1997) found that egoistic climates negatively influenced nurses' satisfaction with their supervisors.
A more recent study by Elci and Alpkan (2009)
also found that egoistic climates were negatively
associated with job satisfaction, whereas benevolent and principled climates were positively associated with job satisfaction. Similarly, Tsai and
Huang (2008) asserted that organizational administrators and managers try to foster benevolent and
principled climates within organizations and prevent egoistic climates from developing. Essentially, what all this research suggests is that egoistic climates (i.e., instrumental, self-interest,
company profit, and efficiency) have a negative
association with work and job satisfaction,
whereas benevolent climates and principled climates have a positive association with work and
job satisfaction. A recent study by Wang and
Hsieh (2012) also found positive associations between caring and rules climates and job satisfaction, and negative associations between instrumental climates and job satisfaction. Table 1

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provides a brief summary of some of these studies
on ethical climates effects on job satisfaction.
Organizational commitment is another outcome variable considered by numerous scholars
(e.g., Ambrose, Arnaud, &. Schminke, 2008; Cullen, Parboteeah, &. Victor, 2003; DeConinck,
2010; Jaramillo, Mulki, & Boles, in press; Martin
&. Cullen, 2006; Ruppel & Harrington, 2000;
Schwepker, 2001; Sims & Keon, 1997; Tsai &.
Huang, 2008; Valentine, Godkin, & Lucero,
2002; Wingreen, 2003). This construct has also
been studied in a variety of contexts. Sims and
Keon (1997) investigated the effects of ethical
climates on the person-organization fit, and concluded that persons whose ideal preferences of
ethical climate matched with the actual ethical
climate in their organizations were more likely to
be committed to their organizations. This particular finding in terms of person-organization fit
and ethical climate was verified by later studies
(Ambrose et al., 2008; Valentine et al, 2002).
Cullen and colleagues (2003) directly investigated
the effects of ethical climate types on organizational commitment and found positive associations between benevolent and principled climates
and organizational commitment, and negative associations between egoistic climates and organizational commitment. They did, however, find that
principled climates were positively related to commitment only for professional workers, not for
nonprofessional workers. As with job satisfaction,
all the existing research suggests that benevolent
and principled climates have positive associations
with organizational commitment, whereas egoistic
climates have negative associations with organizational commitment. Table 2 provides a brief
summary of some of these studies on ethical climate effects on organizational commitment.
The research linking ethical climates and turnover intentions has a very similar conclusion to
the commitment findings, chiefly that egoistic
climates tend to encourage turnover intentions
(e.g., Ambrose et al, 2008; DeConinck, 2011;
Lopez, Babin, & Chung, 2009; Mulki, Jaramillo,
& Locander, 2008; Sims &. Keon, 1997; Stewart et
al, 2011), and principled and benevolent climates
tend to reduce employee turnover intentions. Table 3 provides a brief summary of some of these

Simha and Cullen

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25

Tahle 1
Joh Satisfaction
Authors
Ambrose etal. (2008)

Climate measure
A16-item scole odopted from
Schminke etal. (2005) and
Victor & Cullen (1988)
A 6-item scole odopted from
Victor & Cullen (1988)

Sample
304 full-time employees

Elci&Alpkan(2006)

A 38-item scole odopted from
Schwepker (2001 )ond Victor
& Cullen (1988)

1,174 telecom employees

Goldman & Tabak
(2010)

A 22-item scale adopted from
Victor & Cullen (1988) ond
Acharya (2005)

95 nurses

Joseph & Deshpande
(1997)

A 6-item scale meosuring EC
odapted from Victor & Cullen
(1988)

114 nurses

Koh& Boo (2001)

A 26-item scole from Cullen et ol.
(1993)
A 7-item scole bosed on Quolls &
Puto (1989)

237 monogers

Tsoi& Huong (2008)

A 14-item scole odopted from
Victor & Cullen (1988)

352 nurses

Wong & Hsieh (2012)

A 26-item scole from Cullen et ol.
(1993)

472 full-time employees

Deshpande (1996a)

Schwepker(2001)

206 middle-level
monogers

152solespersons

studies on ethical climate's effects on turnover
intentions.
An additional popular and important stream of
research has focused on the effects of ethical climates on the ethical behavior of organizational
actors (e.g., Deshpande, 1996b; Deshpande & Joseph, 2009; Fu & Deshpande, 2012; Fritzsche,
2000; Leung, 2008; Rothwell & Baldwin, 2007;
Saini & Martin, 2009; Shacklock, Manning, &
Hort, 2011; Smith, Thompson, &. Iacovou, 2009;
Wimbush & Shepard, 1994).
Wimbush and Shepard (1994) were among the
•first scholars to propose a model linking ethical
climates with ethical behavior. In a subsequent

Key results
A fit between employee morol development ond
ethicol climote is linked with higher levels of ¡ob
satisfaction.
Professionoi ond coring climates were positively
ossocioted with job sotisfoction; instrumento!
climotes were negotively ossocioted with job
satisfaction.
Self-interest climotes were negotively ossocioted with
job sotisfoction; teom interest, sociol
responsibility, and law ond code climotes were
positively ossocioted with job sotisfoction.
Caring and low ond code climotes were positively
ossocioted with oil focets of job sotisfoction;
instrumentol climotes were negotively associoted
with sotisfoction with the teom.
Caring climotes were positively reloted with both pay
ond supervisor satisfaction; efficiency climotes
were negotively reloted with supervisor
sotisfoction.
Principled ethicol climates were positively ossocioted
with job sotisfoction.
Positive ethicol climotes were positively associated
with job sotisfoction ond orgonizotionol
commitment.
Caring climates were positively associoted with oil
focets of job sotisfoction; independence ond rules
climotes were positively ossocioted with overoll job
sotisfoction. Instrumentol climates were negatively
associated with overoll job sotisfoction.
Instrumentol climotes were negotively related to job
sotisfoction; coring and rules climates were
positively reloted to job satisfaction.

study, Wimbush and colleagues (1997) corroborated the earlier model and found that ethical
climate dimensions were related to ethical behavior. Deshpande (1996b) also found a link between
ethical climate and ethical behavior of successful
managers. This particular ñnding has been replicated in Polish, Russian, and Chinese contexts
(Deshpande, George, & Joseph, 2000; Deshpande,
Joseph, & Shu, 2011; Simha & StachowiczStanusch, in press). Rothwell and Baldwin (2007)
suggested that benevolent climates have a positive
association with employee willingness to engage
in whistle-blowing. Parboteeah and Kapp (2008)
also found a positive association with principled

Academy of Management Perspectives

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Table 2
Commitment
Authors
Ambrose et al. (2008)

Cullen et al. (2003)

Climate measure
A 16-item scale adapted from
Schminke et al. (2005) and
Victor& Cullen (1988)
Both the 26-item and 36-item
scales from Cullen et al.
(1993) and Victor & Cullen
(1988)

Sample
304 full-time employees

Study 1:411 employees; Study
2:139 accountants

Key results
A fit between employee moral development and
ethical climate was linked with higher levels of
organizational commitment.
Egoistic climates were negatively related to
commitment; benevolent climates were positively
related to commitment. A positive relationship
between principled climates and commitment was
found only for professional workers.

A selection of a part of the 26item Victor & Cullen (1988)
scale
A 7-item scale based on Quails &
Puto (1989)

111 IT managers

Benevolent and principled climates were positively
associated with organizational commitment.

152 salespersons

Sims & Keon (1997)

A15-item scale adapted from
Cullen et DI. (1993)

86 working students

Tsai & Huang (2008)

A14-item scale adapted from
Victor & Cullen (1988)

352 nurses

Positive ethical climates were positively associated
with job satisfaction and organizational
commitment.
A fit between ethical preferences and ethical climate
values was hypothesized as increasing
commitment, but was not supported.
Instrumental climates were positively associated with
continuance commitment and negatively
associated with affective commitment and overall
commitment. Caring and rules climates positively
affected normative commitment.

Climate measure
A16-item scale adapted from
Schminke et al. (2005) and
Victor & Cullen (1988)
A 7-item scale adapted from
Schwepker (2001)
A 7-item scale based on Quails &
Puto (1989)

Sample
304 full-time employees

A15-item scale adapted from
Cullen et al. (1993)
A 2-item scale adapted from Koh
& Boo(2001)

86 working students

Ruppel & Harrington
(2000)
Schwepker(2001)

Tahle3
Turnover
Authors
Ambrose et al. (2008).

Mulki et al. (2008)
Schwepker(2001)

Sims& Keon (1997)
Stewart et al. (2011)

212 healthcare employees
152 salespersons

348 warehouse employees

climates and workplace safety behaviors. Smith
and colleagues (2009) found that egoistic climates
were associated with project status misreporting
whereas principled climates were associated with
less misreporting. However, Smith and colleagues
(2009) did not find any association between be-

Key results
A fit between employee moral development and
ethical climate was linked with lower levels of
turnover.
Strong and positive ethical climates reduced role
stress and increased trust in supervisors.
Positive ethical climates were positively associated
with job satisfaction and organizational
commitment.
A fit between ethical preferences and ethical climate
values reduced turnover intentions.
Ethical climates moderated the diversity climate and
turnover intentions link such that turnover
intentions were lowest for workers perceiving both
0 pro-diversity and high ethical climate.

nevolent climates and misreporting. Bulutlar and
Oz (2009) found a positive association between
egoistic climates and workplace bullying behaviors and a negative association between principled
climates and workplace bullying behaviors. Ta-,
ble 4 provides a brief summary of some of these

2012

Simha and Cullen

27

Table 4
Ethical Behavior
V
Authors
Arnaud & Schminke (in
press)
Deshpande (1996b)

Deshpande & Joseph
(20091
Fritzsche (2000)

Leung (2008)

Parboteeah & Kapp
(2008)
Rothwell & Baldwin
(2007)
Saini &Mortin (2009)

Smith etal. (2009)

Wimbush etal. (1997)

Climate measure t , . ;,:;.;À-iSaniiplé,;-'-.i-' " j '
;
Key results
A I 6-item scale adapted from
648 employees
Ethical climate, collective moral emotion, and collective ethical
Schminke etal. (2005) and
efficacy interact to influence ethical behavior.
Victor & Cullen (1988)
A 6-item scale adapted from
206 managers
People operating under caring climates perceived a positive
Victor & Cullen (1988)
association between success and ethical behavior; the opposite
was true far people under instrumental climates.
A 6-item scale adapted from
103 nurses
Independence climates had a significant positive associatian with
Victor & Cullen (1988)
ethical behavior.
The 26-item scale from Victor &
241 employees
Law and code and independence climates were associated with
Cullen (1988)
ethical behavior. There was an equal likelihood of people in
instrumental climates either paying or not paying a bribe.
The 26-item scale from Victor &
109 employees
Instrumental and independence climates were associated with
Cullen (1988)
negative extra-role behaviors; caring and law and code
climates were associated with positive extra-role behaviors.
The 26-item scale from Victor &
237 manufacturing
Principled climates and benevolent climates were negatively
Cullen (1988)
employees
associated with injuries, and principled climates were
positively associated with safety-enhancing behaviors.
The 36-item scale from Cullen
198 police officers and
Friendship or team ethical climates had positive associations with
etal.(1993)
184 civilians
willingness to engage in whistle-blowing.
The 26-item scale from Victor &
174 marketing executives Egoistic climates were associated with lower risk-taking
Cullen (1988)
propensity; benevolent climates were associated with higher
risk-taking propensity.
The 36-item scale from Victor &
264 state government
Rules climates were associated with less frequent misreporting;
Cullen (1993)
project team members
instrumental climates were associated with more frequent
misreporting.
The 36-item scale from Victor &
525 retail store
Instrumental climates were positively associated with unethical
Cullen (1993)
employees
behaviors; independence, caring, law and code, ond rules
climates were negatively associated with unethical behaviors.

studies on ethical climate's effects on ethical
behavior.
Dysfunctional behavior is another organizational outcome variable investigated by several
ECT smdies (Bulutlar & Oz, 2009; Martin &
Cullen, 2006). Carr and colleagues (2004)
stressed in their article that dysfunctional behavior needed to be studied more often by organizational climate researchers. Various studies linking
ethical climates with dysfunctional behavior have
found that benevolent and principled climates are
the best climates in terms of reducing employee
deviance and employee dysfunctional behaviors
(Bamett & Vaicys, 2000; Bulutlar & Oz, 2009;
Elm & Nichols, 1993; Martin & Cullen, 2006;
Ozer & Yilmaz, 2011; Peterson, 2002; Vardi,
2001; Watley, 2002; Wimbush et al., 1997). In a
similar vein, research has concluded that egoistic

climates are the worst ones in terms of encouraging employee dysfunctional behaviors (Martin &
Cullen, 2006). Table 5 provides a brief summary
of some of these studies on ethical climate's effects
on dysfunctional behavior.
The essential theme emerging from this stream
of research is that benevolent and principled climates (i.e., caring, independence, rules, and law
and code) are the climates associated with positive
outcomes, and egoistic climates (i.e., instrumental) are associated with a whole host of negative
outcomes. Research (Cullen et al., 2003; Martin
&. Cullen, 2006) has noted that particular types of
organizations tend to have particular ethical climate types. For instance, organizations needing to
adhere to a visible code of conduct and rules (such
as engineering, accounting, and law firms) are
more likely to have principled climates (either

Academy af Management Perspectives

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Navember

Table 5
Dysfunctional Bebavior

Authors

Climate measure

Barnett&Vaicys(2000)

The 26-item scale from Victor &
Cullen (1988)

207 marketing
professionals

Sample

Individuals operating under rules climates were
less likely to engage in questionable selling
practices even when they themselves did not
feel that the practices were unethical.
Individuals operating under friendship climates
were more likely to engage in questionable
selling practices when they felt that the
practices were unethical.

Bulutlar &0z (2009)

The 26-item scale from Victor &
Cullen (1988)

201 full-time employees

Elm & Nichols (1993)

A 23-item scale adapted from
Victor & Cullen (1988)

243 managers

Peterson (2002)

The 36-item scale from Cullen
et al. (1993)

202 alumni

Instrumental climates were positively associated
with bullying behaviors; rules, caring, and law
and code climates were negatively associated
with bullying behaviors.
Managers differ in terms of their moral reasoning
in principled climates as compared to managers
in benevolent climates.
A higher frequency of unethical behavior was
found in egoistic climates as compared to
benevolent and principled climates. A higher
frequency of unethical behavior was found in
companies without a code of conduct.

Vardi(2001)

The 26-item scale from Victor &
Cullen (1988)

97 full-time employees

rules or law and code). Firms that operate in
conditions of high volatility and competitiveness
are more likely to harbor egoistic climates. This
suggests that organizations operating in the financial trading sector are likely to have egoistic climates in them. Similarly, organizations with a
somewhat humanistic mission will be likely to
harbor benevolent climates. For instance, organizations dealing with environmental motives—
"green" organizations—may harbor benevolent
climates. However, this may vary from case to
case. For instance, one may encounter an accounting organization that has a predominantly egoistic
climate (the case of Arthur Andersen seems one
possible example) rather than a principled climate. In a similar vein, Venezia, Venezia, and
Hung (2010) found differences in the ethical climates of public accounting firms as opposed to
private-sector accounting firms in Asia. They
found that public accounting firms were more

Key results

A significant negative relationship was found
between benevolent climates and
organizational misconduct. Frequency of
misbehovior reported by managers was
negatively related to rules, instrumental, and
caring climates.

likely to harbor principled climates than the private accounting firms.
However, judging from the evidence evinced
by current research findings, it appears that organizational leaders should strive to encourage and
establish benevolent and principled climates in
their organizations, while striving to prevent egoistic climates from setting in.
A Critique of the Literature Base on ECT
ne of the key themes emerging from the distillation of the literature is that egoistic climates are the least preferred type of climate,
as they have been linked with a variety of negative
and undesirable organizational outcomes. Conversely, it appears that benevolent and principled
climates are much to be desired, as they have been
linked with so many different positive and desirable organizational outcomes. However, there are
a few inconsistencies in this otherwise robust lit-

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2012

Simha and Cullen

erature base. We offer a critique of these inconsistencies and suggest that some reframing could
change some emergent themes.
Ethical Climate Questionnaire (ECQ)

One of the inconsistencies in ethical climate research is that authors have used very different
measures of ethical climate. The most popular
instrument is the ECQ formulated by Victor and
Cullen (1987, 1988). Respondents taking the
ECQ were asked to act as observers reporting on
organizational expectations, not their own personal beliefs or their affective evaluations of the
climates. The original format contained 26 items
and used a forced-choice six-point Likert scale
measure. Cullen, Victor, and Bronson (1993) later
developed a lengthier 36-item questionnaire to
measure ethical climate. Both the 26-item and
36-item questionnaires were demonstrated to be
valid and reliable by Cullen and colleagues (1993)
and have heen used hy other scholars in their
research.
However, some studies have used a very short
six-item scale to measure ethical climate types
(Deshpande, 1996a, 1996b; Deshpande et al,
2000, 2011; Joseph & Deshpande, 1997). A few
others have used various shortened versions of the
ECQ. Some studies have not used Victor and
CuUen's (1987, 1988) ECQ at all; their versions of
ethical climate are often measured by very short
scales. For instance, Stewart and colleagues
(2011) measured ethical climate using a two-item
scale. Schwepker (2001) dichotomized his measure of ethical climate hy classifying ethical climates as good ethical climates and had ethical
climates. A measure pertinent to marketing research has been employed by several researchers
(DeConinck, 2010, 2011; Jaramillo et al, in press;
Lopez et al, 2009; Schwepker &. Hartline, 2005;
Valentine, Greller, &. Richtermeyer, 2006). That
particular measure uses four scales measuring responsibility/trust, peer behavior, ethical norms,
and selling practices. However, in comparison to
the original Victor and Cullen scale, it lacks completeness, and is much too specific to marketing
and sales organizational contexts.
Similarly, there are a lot of differences in studies in terms of Likert scale choices used (some used

29

four-point scales; some used five- or seven-point
scales). Another issue with some of these studies is
that several of them obtained different results in
their factor analyses, wherein the ECQ items
do not always load consistently (Smith et al,
2009). This results in different scales heing used to
measure the same construct (i.e., in some cases,
only two items were used to create a scale for
instrumental climates, and in some cases, six items
were used).
These inconsistencies in measuring ethical climates suggest that in a few cases, perhaps what
was studied were not the ethical climates proposed
hy Victor and Cullen (1987, 1988). This led to
some difficulty in comparing results across studies.
In our assessment, the Victor and Cullen framework seems to be superior to dichotomous measures (i.e., good versus bad ethical climates) because of the lack of explanatory power in
dichotomous measures. First, classifying an ethical
climate as good or had does not provide any understanding of unique effects of different climates,
and second, the Victor and Cullen framework and
measure allow one to study climates without assigning positive or negative valuations. All ethical
climate types can have positive or negative outcomes, so assigning good and had lahels to ethical
climates is not helpful in advancing our knowledge. Dichotomous or short measures of ethical
climates also do not consider the various ethical
criteria that are used to establish ethical climates
in the first place.
Traditional Organizational Outcome Variables

As noted earlier, most of the literature on ECT
has found negative consequences of egoistic climates and positive consequences of benevolent
and principled climates. One possible reason may
be that most studies have examined traditional
organizational outcomes and have not ventured
into nontraditional outcomes.
For instance, it is possible that egoistic climates
would he positively associated with measures of
personal success. Most traditional outcome variahles examined by researchers focus on outcomes
beneficial to organizations (such as commitment
and turnover intentions). However, if one were to
focus on a different variable—say, personal re-

30

Academy af Management Perspectives

cords—one could hope to find a positive association between instrumental climates and an outcome variable that yields a net positive for an
individual. Similarly, if one considers the reverse
of organizational commitment, one could claim
that instrumental climates encourage employees
to seek out better prospects for themselves (an
employee could seek out a more lucrative or beneficial job offer with another organization or intraorganizational unit or group if the employee is
motivated by self-interest-seeking behavior).
In a similar vein, changing the outcome variable to a more nontraditional organizational behavior outcome could yield different results for
benevolent and principled climates. For instance,
it is possible that a pervasive benevolent climate
might prevent organizational leaders from making
difficult decisions even when such decisions are
necessary. Similarly, a restrictive reliance on a
rules climate could result in an organization stifling its employees' urge to speak out on a moral
issue or perhaps inhibit creativity or innovation.
Future Areas of Exploration
ne future area of exploration to enhance ECT
is the determination of contextual determinants of ethical behavior (Arnaud &.
Schminke, in press; Martin & Cullen, 2006;
O'Fallon & Butterfield, 2005). Arnaud (2010)
and Arnaud and Schminke (in press) have introduced a newer measure of ethical climate, the
Ethical Climate Index (ECI), which is a measure
used to determine contextual determinants of ethical behavior. The ECI measures the dimensions
of collective moral sensitivity, collective moral
judgment, collective moral motivation, and collective moral character. More research on the ECI
would be a welcome next step. Similarly, more
research spanning multiple levels of analysis needs
to be conducted to better understand contextual
determinants of ethical behavior. An interesting
area in that regard stems from the informal economy (Godfrey, 2011); perhaps ethical climates
could be studied in the context of informal-economy enterprises. This would be particularly interesting because informal economies are prevalent
in developing and undeveloped nations, and
studying ethical climates in the context of infor-

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November

mal economies is bound to be important and
useful.
Another area of research that would perhaps
benefit practitioners and managers would be to
establish a clear and unambiguous schema for
the establishment and management of different
ethical climates. It is not enough to just tell
practitioners that they need to encourage benevolent and principled climates and discourage egoistic climates; it is imperative that they be given
clear instructions on how they can foster and
encourage some climates while discouraging others. A how-to guide would be invaluable for practitioners; currently, the research on ethical climates does not seem to have such a guide
available.
A third area of exploration would be, as we
alluded to in our critique, to research some additional organizational outcomes. Perhaps doing so
would allow one to see the possible merits of
egoistic climates and possible demerits of benevolent and principled climates. Playing devil's advocate may allow us to investigate other interesting relationships and discover potentially
interesting findings that previous ECT studies
have ignored. For instance, an independence climate where employees are encouraged to act on
their own deeply held moral convictions could
result in potentially litigious scenarios. Consider,
for example, a manager who is a deeply devout
and religious person. That manager may discriminate against a gay subordinate due to his or her
sexual orientation, which would then result in an
expensive lawsuit against the organization. Similarly, some ongoing preliminary work has found
that benevolent climates tend to be associated
with increased rates of organizational corruption
(Stachowicz-Stanusch & Simha, in press). Perhaps other studies could examine the association
of benevolent climates with other variables such
as bribery or whistle-blowing.
A fourth area of exploration would be to expand intemational research in ECT, especially
cross-national and cross-cultural comparisons.
Many of the ECT studies have been conducted in
a variety of national contexts (e.g., the United
States, China, Russia, and India), but very few
studies (Kuntz, Kuntz, Elenkov, & Nabirukhina,

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Simba and Cullen

in press; Laratta, 2011; Weeks et al., 2006) have
conducted comparative cross-national or crosscultural research in an ECT context. An expansion of such cross-cultural or cross-national work
on ECT would have the additional benefit of also
expanding the international business literature
base. This would also increase our knowledge base
on phenomena in countries that are rarely studied
by organizational researchers.
A final area of further exploration deals with
dysfunctional behaviors and unethical behaviors
that are largely uninvestigated (Martin & Cullen,
2006). Litzky, Eddleston, and Kidder (2006) suggested that ethical climates could be used by managers to reduce workplace deviance. However, few
studies have investigated dysfunctional behaviors
and ethical climates. One such study by Bulutlar
and Oz (2009) investigated the effects of ethical
climates on workplace bullying, and a few other
studies have investigated other dysfunctional and
deviant behaviors (e.g., Peterson, 2002; Vardi,
2001). A recent study by Arnaud and Schminke
(in press) found that ethical climates, collective
moral emotion, and collective ethical efficacy interact and influence ethical behavior. In particular, they found that ethical climates promote ethical behavior when collective empathy and
collective ethical efficacy levels are high. But on
the whole, this is an area that is relatively unexplored, and there is need for more longitudinal
exploration (Smith et al., 2009) in this area. For
instance, some lines of inquiry could study the
effects of ethical climates on sexual harassment
and corporate fraud, among other variables.
Conclusions

T

his article has reviewed the existent literature
on ECT and offered a thorough literature review on both the antecedents and the effects of
ethical climates. Ethical climates have been demonstrated to have a variety of effects, some positive and some negative, on organizational outcomes. This fact, when coupled with frequently
occurring organizational ethical transgressions,
emphasizes the importance of studying ethical
climates.
However, there remain several areas in ECT
research in need of improvement and others that

31

offer opportunities for future study. One issue in
the research base on ethical climate is the use of
different measures. This situation makes it more
difficult to compare results across the breadth of
studies. Another issue is that most studies have
relied on traditional organizational outcomes,
which perhaps has contributed toward marking
egoistic climates as negative. Most of the existent
research base suggests that benevolent and principled climates are preferred over egoistic climates
in an organizational context. However, there may
be cases where instrumental climates are preferable to benevolent or principled climates. We urge
future research to take a fresh approach to this
issue and investigate positive effects of instrumental climates as well as negative effects of benevolent or principled climates.
Finally, we have listed a few areas for further
exploration that we believe will enhance the
knowledge base on ECT. We especially advocate
that managers and practitioners be provided with
a detailed and unambiguous schema to be able to
establish and manage ethical climates. The more
robust the base of ECT can be made, the better it
is for organizational research—and therefore, for
organizations and practicing managers. If more
research is conducted, we can hope to be better
able to control and curtail deviant and dysfunctional behavior.
Acknowledgments
We wish to thank Timothy Devinney and two anonymous
referees for their helpful suggestions.

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