Perceptions of Organizational Ethicality: Do Inflated Perceptions of Self Lead to Inflated Perceptions of the Organization?

ABSTRACT. Scholars have suggested that thetendency for an individual to perceive him- or herselfas more ethical than others might influence theindividual’s perceptions of his or her organization’sethics. The purpose of this study is to consider ifand/or when such a relationship exists. A thoroughconsideration of the nature of perceptions of relativeethicality suggests that a positive self-bias wouldnegatively influence perceptions of organizationalethicality. The results of an empirical study involvingworking managers and employees of a hospital supportthat argument. Furthermore, the results indicate thatorganizational identification, perceived organizationalcohesion, and an individual’s insulation also influenceindividual perceptions of relative organizationalethicality. The findings illuminate this particularphenomenon and further our understanding of therelationship between the individual and the organi-zation, more generally.

KEY WORDS: ethical decision-making, self-biases

“[We] have a lot of good programs – vol-unteer work and things like that. And wegive a lot back to the community. So I thinkthat, yes, we’re probably better than youraverage company.”

– A financial clerk commenting on her company’s ethics.

One of the most consistent findings in researchon ethical decision-making is that individualstend to view themselves as more ethical thanpeers, co-workers, supervisors, and others thatthey know (Ford and Richardson, 1994).Recognizing the potentially substantial implica-tions of this phenomenon, Messick andBazerman (1996) warned that an individual’sperception that he or she is more ethical thanothers might characterize that individual’s atti-tudes about the organization to which he or shebelongs.

Managers may feel that their company’s contribu-tions to society are more important than those ofother companies, even when a neutral observer seescomparability. Similarly, executives may feel thatthe damage their firms cause society is not asharmful as that created by other organizations.Such a pattern of beliefs can create a barrier tosocietal improvement when each organizationunderestimates the damages that it causes (p. 18).

In short, Messick and Bazerman offered arelatively straightforward and interesting claim:individual self-biases may sharply influence theperceptions that individuals have of their orga-nizations’ ethicality, and biased perceptions ofhow one’s organization compares to others’ can

Perceptions of OrganizationalEthicality: Do Inflated Perceptionsof Self Lead to Inflated Perceptions of the Organization? Scott J. Reynolds

Journal of Business Ethics

42: 253–266, 2003.© 2003 Kluwer Academic Publishers. Printed in the Netherlands.

Scott J. Reynolds is an assistant professor of business ethicsat the University of Washington Business School. Hisresearch interests include ethical decision-making, moralawareness, and the practice of stakeholder management.

be detrimental to society at large. Given the veryserious consequences that they discuss, this articleexplores their initial claim about the relationshipbetween self and organizational perceptions ofrelative ethicality in more detail.

To begin, I evaluate the theoretical validity ofthe concept of perceived relative organizationalethicality. Then, I consider the relationshipbetween an individual’s self perception biases andthe individual’s perceptions of the organization’srelative ethicality and hypothesize, in contrast toMessick and Bazerman’s informal argument, thatgiven the nature of the self-perception bias anindividual’s bias will negatively influence his orher view of the organization’s ethicality.Nevertheless, I recognize that individuals candevelop inflated perceptions of both themselvesand their organizations, and therefore I considerthe influence of other variables in this equation,namely organizational identification, perceivedorganizational cohesion, and insulation. Thisstudy has the opportunity not only to shed lighton the phenomena Messick and Bazermanidentified, but also to illuminate our under-standing of the relationship between the indi-vidual and the organization, more generally.

Perceptions of relative ethicality

Social comparisons are an integral part of socialpsychological processes (Ashforth and Mael,1989; Fiske and Taylor, 1984; Goodman, 1977;Salancik and Pfeffer, 1978; Wood, 1989). In theabsence of absolute standards or measures, indi-viduals rely on social comparisons to evaluatetheir own abilities and opinions (Festinger, 1954).Scholars have suggested that comparisons toothers are most prevalent when conditions areparticularly ill defined, vague or ambiguous, suchas in the case of intelligence, attractiveness, andeven driving skills (Budner, 1962; Eysenck et al.,1972; Taylor and Brown, 1988). As the notionof ethicality or “being ethical” is especially illdefined, vague and ambiguous (Toffler, 1986), itis not surprising that researchers have repeatedlydemonstrated that individuals rely on social com-parisons to form their perceptions of their ownindividual ethicality (Ford and Richardson, 1994).

What is especially interesting about socialcomparisons is that individuals tend to haveinflated perceptions of themselves (Taylor, 1989).For instance, individuals generally tend to seethemselves as more intelligent, more attractive,and as better drivers than other people.Moreover, several researchers have discovered thatindividuals perceive themselves as more ethicalthan peers, co-workers, supervisors, and othersthat they know (Brenner and Molander, 1977;Ferrell and Weaver, 1978; Izraeli, 1988). Ingeneral, a favorable assessment of one’s own skillsand attributes is very common and has beenassociated with positive mental health (Taylor andBrown, 1988).

Given the prevalence of social comparisonsand the ambiguous nature of what it means to be“ethical,” it is reasonable to argue that individ-uals also make sense of their organization’s ethicsby comparing the ethical aspects of their orga-nization to the ethical aspects of other organiza-tions of which they are aware. In truth, anorganization can only be understood by com-paring its characteristics to those of other similarorganizations. As the financial clerk in theopening quote illustrates, individuals refer totheir knowledge of the ethics of other organiza-tions in order to place a context around theambiguous nature of what it means to be an“ethical organization.” As a construct, then, per-ceived relative organizational ethicality recognizesthe prevalence of social comparisons and reflectshow individuals make sense of the particularlyvague and ambiguous set of characteristicsassociated with ethical behavior.

Furthermore, as Messick and Bazermanwarned, it is important to recognize and under-stand how individuals form perceptions of relativeorganizational ethicality because these kinds ofperceptions can serve as a basis for individualactions, perhaps more so than perceptions thatare based on some absolute sense of ethics andmorality. For instance, consider two employeeswho both feel that their organization is uneth-ical in a general or absolute sense of the term. Ifone employee believes, however, that the orga-nization’s unethical conduct is typical in theindustry she may feel less pressure to take sometype of action than the other employee who

254 Scott J. Reynolds

perceives that such conduct is very uncommon.In such a situation it is not sufficient to knowthat both individuals believe that the organiza-tion is unethical. By recognizing that one indi-vidual perceives the unethical behavior to beuncommon or unusual it is reasonable to predictspecific individual behaviors such as voice or exitrather than loyalty (Farrell, 1983).

Antecedents of perceived relative organizational ethicality

Given the potentially critical role of perceptionsof relative organizational ethicality, understandingtheir antecedents may be especially valuable.Messick and Bazerman (1996) informally positedthat perceptions of relative organizational ethi-cality might be directly related to the self-perception bias. Closer examination, though,suggests that this argument fails to recognize theunderlying mechanisms that shape these percep-tions. Imagine the individual who believes thathe or she is more ethical than peers, co-workers,supervisors and others in the organization. Bydefinition, that individual would tend to viewthose individuals with whom he or she works asrelatively less ethical people. Research alsosuggests, though, that individuals tend to believethat the world “out there,” the larger context thatexists beyond our immediate contact, is a positiveplace (Taylor, 1989). Subsequently, believing thatthe world is generally a positive place but alsoconvinced that his or her organization iscomprised of less ethical people, the individualwould tend to conclude that the organizationmust be less ethical than other comparableorganizations that exist “out there.” In otherwords, the more an individual perceives him- orherself as relatively more ethical than others, themore likely he or she is to believe that theorganization is less ethical than other organiza-tions. This is in direct contrast to Messick andBazerman’s warning, and therefore both argu-ments are presented as competing hypotheses.

Hypothesis 1a: Perceptions of relative selfethicality will be positively related to per-ceptions of relative organizational ethicality.

Hypothesis 1b: Perceptions of relative selfethicality will be negatively related to per-ceptions of relative organizational ethicality.

Still, it is conceivable that an individual mayhave both inflated perceptions of the self and ofthe organization. What this suggests is not nec-essarily contrary to hypothesis 1b, but ratherindicates the influence of other variables. Inparticular, I propose that organizational identifi-cation, perceptions of organizational cohesion,and an insulated view of the organization mayplay important roles in the development of per-ceptions of relative organizational ethicality(Figure 1).

Organizational identification is the degree towhich an individual defines him- or herself bythe same attributes that he or she believes definethe organization (Dutton et al., 1994). It is aperception of oneness to an organization, as theboundary between an individual’s own identityand the identity of the organization becomes lessdefinite (Mael and Ashforth, 1992). Research hasdemonstrated that organizational identificationcan have a positive influence in the organization,enhancing outcomes such as job satisfaction,turnover intentions, job involvement, andjob motivation (Abrams et al., 1998; vanKnippenberg and van Schie, 2000).

Organizational identification influences indi-vidual perceptions of the organization in thesense that increased identification blurs theboundary between the individual and the orga-nization. Consequently, as an individual comesto identify with the organization and perceivesthe organization as a reflection of him- or herself,his or her biases about the self are more likelyto extend to the organization. Thus, the indi-vidual who identifies very strongly with theorganization would see the organization more asan image of him- or herself, one of the “mostethical” employees, rather than as a reflection ofthe majority of employees who are perceived tobe “less ethical.” In this way organizationalidentification will moderate the relationshipbetween an individual’s self-perception and his orher perception of the organization’s relativeethicality.

Perceptions of Organizational Ethicality 255

Hypothesis 2: Organizational identification willmoderate the relationship between percep-tions of relative self ethicality and percep-tions of relative organizational ethicalitysuch that the more an individual identifieswith the organization the more perceptionsof relative self ethicality will positivelyinfluence perceptions of relative organiza-tional ethicality.

Understanding the role of perceived cohesionand insulation requires consideration of theunderlying factors of relative perceptions.Relative perceptions are comprised of two com-ponents: an individual element (an attribute, aperson, an organization) that is to be assessed,and a relevant context – a socially constructedaggregation of categorically similar elements (agroup, a race, an industry) to which the indi-vidual element is compared (Bond et al., 2000).General perceptions of both components arecritical in individual sensemaking processes. Forinstance, research has shown that low self-esteem,a low opinion of one’s self more generally,influences perceptions of relative status on avariety of scales (Ruehlman et al., 1985).Likewise, Harris et al. (2000) demonstrated thatby manipulating the context in which compar-

isons are made the self-perception bias can bemitigated or even eliminated. Hence, perceptionsof both components could influence perceptionsof relative organizational ethicality.

One method of conceptualizing the indi-vidual’s perceptions of his or her organizationmore generally is to focus on perceptions oforganizational cohesion. Cohesion is the espritde corps that individuals feel in a group ( Janis,1972). The more cohesive a group or organiza-tion is, the more its members share a mutualattraction and admiration for each other, anddemonstrate friendly, trusting and caring behav-iors towards each other (Carron and Brawley,2000; Hensley and Griffin, 1986; Mudrack,1989). Thus, the more the individual perceivesorganizational cohesion, the more the individualviews the organization favorably as a place he orshe wants to work. Such favorable opinions willpredispose the individual to view many if not allcharacteristics of the organization in a positivelight, especially those characteristics that arevague and ambiguous. Thus, the more the indi-vidual perceives cohesion in the organization, themore likely the individual is to have a favorableview of the ethicality of the organization.

While cohesion may influence perceptions ofthe organization to be assessed, insulation can


Figure 1. Factors influencing perceptions of relative organizational ethicality: Hypothesized relationships.

influence the individual’s awareness of thecontext in which the organization is to beassessed. I define insulation as an employee’s lackof interaction with individuals who are notmembers of his or her organization. Regardlessof how many employees the individual encoun-ters during a typical day, the insulated employeeencounters few non-employees. If an individualis insulated and does not regularly encounterindividuals from other organizations, he or shewill have less objective information about theethics of other organizations. Instead, the indi-vidual may develop perceptions of other organi-zations based on internal sources such asorganizational leaders and formal communiqués.It is presumed that if only for reasons of impres-sion management, such sources would be biasedin favor of the organization (Goffman, 1959).Therefore, the more insulated the employee isthe more likely he or she is to have an inflatedview of his or her organization’s relative ethi-cality.

Considering cohesion and insulation asantecedents of perceived relative organizationalethicality is consistent with the general princi-ples of theory on groupthink ( Janis, 1972, 1982;Sims, 1992). According to groupthink theory, themore cohesive and insulated a group is, the morelikely the group is to suffer deleterious conse-quences such as decisions of poor quality. Oneof these consequences is a perception of moralsuperiority, an illusion that the group is moreethical than other comparable groups. Althoughopinions about the phenomenological validity ofgroupthink vary (Esser, 1988; Fuller and Aldag,1998), the fundamental principles of groupthinktheory provide additional support for the notionthat cohesion and insulation positively influencean individual’s perceptions of his or her organi-zation’s relative ethicality. This leads to thefollowing hypotheses:

Hypothesis 3: Perceptions of organizationalcohesion will be positively related to per-ceptions of relative organizational ethicality.

Hypothesis 4: Insulation will be positivelyrelated to individual perceptions of relativeorganizational ethicality.

Method

Sample

The participants in this study were 71 managersenrolled in two evening MBA courses at aMidwestern university and 27 employees in theradiology department of a Rocky Mountainhospital (n = 98). Using these two groups estab-lished both an element of control for organiza-tional conduct (the hospital employees) and adegree of generalizability to a variety of organi-zations (the working students). The average ageof the participants was 32 years (s.d. = 7.67) andages ranged from 21 to 62. Of the 98 partici-pants, 50 (51%) were male and 48 (49%) werefemale. With the exception of one student, allof the participants worked full-time. The singleexception was a woman who had recently quither job to stay at home with her children; shewas instructed to refer to her previous employer.The average tenure was 4.47 years (s.d. = 4.33).

Procedure

The working students were invited to completethe survey as part of their regular class experi-ence. The hospital employees completed thesurveys during their breaks on a single afternoon.All participants were informed that their partic-ipation was voluntary and that their responseswould be completely anonymous. In addition,they were informed that the survey was forresearch purposes only – no one from their orga-nizations would have access to the data. Theinstrument took approximately 5–10 minutes tocomplete, and no one required more than 10minutes to complete the survey.

Measures

Perceived relative organizational ethicality. Theresponse variable, perceived relative organiza-tional ethicality, was defined as the extent towhich the individual perceived that his or herorganization was more ethical than the averageorganization. The measure included four 5-point


Likert scale items, two of which were reversescored. Recognizing that the literature has estab-lished a consistent positive bias on measures suchas these, I was concerned that the 5-point itemswould not allow enough variance for meaningfulanalysis. Subsequently, perceived relative organi-zational ethicality was also measured using athermometer scale, a 16-centimeter line acrossthe page with “the most ethical organization” atone end, “the least ethical organization” at theother end, and “an average organization” in theexact middle (Appendix A). Participants wereinstructed to complete the following sentence,“Compared to other organizations, my organi-zation is . . .” with an “X” on the line. This itemwas scored by measuring in centimeters thedistance from the center mark to their mark.Positive scores reflected marks on the side of “themost ethical organization.” Responses from thefour Likert-scale items and the thermometer scalewere converted to z-scores and then averagedinto an overall measure of perceived relativeorganizational ethicality. The Cronbach alpha ofthis scale was 0.91.

Relative self ethicality. The predictor variable, per-ceived relative self ethicality, was defined as theextent to which an individual perceived himselfor herself as more ethical than others in theorganization. Its measurement was consistent inform with the measurement of perceived relativeorganizational ethicality. To reduce systematicerror in explaining correlations between self andorganizational measures, I introduced certainvariations in the perceived relative self ethicalityitems. First, the measure included only three 5-point scale items. Second, none of the items werereverse-scored. Another thermometer-style scaleasked, “Compared to all other employees, I aman . . .” with a 16-centimeter line where theparticipants placed an “X” between “the mostethical employee” and “the least ethicalemployee.” The three Likert scale items and thethermometer measure were converted to z-scoresand combined into an overall measure of per-ceived relative self ethicality (

α = 0.77).

Organizational identification. Organizational iden-tification was measured with Mael and Ashforth’s

(1992) six-item Organizational Identificationinstrument. Since employees from many differentcompanies were responding to the items, thephrase “my company” was listed in each of theitems in place of a specific company’s name asMael and Ashforth indicate. The Cronbach alphaof this 6-item scale was 0.76.

Cohesion. Cohesion was measured with threeitems from Moorhead and Montanari’s (1986)cohesion scale. These items were selected becausethey were part of an established cohesion scaleand focused specifically on issues of friendliness,trust, and loyalty. The items were reworded sothat they referred to the respondent’s organiza-tion. The final cohesion scale registered aCronbach alpha of 0.78.

Insulation. Insulation was defined as the extentto which the employee regularly interactedwith individuals who were not members of hisor her organization. It was measured with threeitems from Moorhead and Montanari’s (1986)insulation scale. The Cronbach alpha of this scalewas 0.70.

Control variables. A great deal of research hassuggested that demographic variables can berelated to individual perceptions of ethical issues(Ford and Richardson, 1994; Low et al., 2000).In particular, I assumed that gender might exertsome influence on the individual’s identificationwith the organization and/or his or her percep-tions of the organization’s relative ethicality(Ambrose and Schminke, 1999). Consequently,that information was collected for use as a controlvariable. I also recognized that organization-specific factors could strongly influence percep-tions of the organization’s relative ethicality, so adummy variable representing employment at thehospital was also created as a control measure.

Confirmatory factor analysis

After collecting the data, I scanned all of thecompleted surveys. Only two items were leftunmarked. Those values were replaced with themean response of the other items comprising that


construct (Schwab, 1999). The responses ofeach individual survey appeared to be legitimateand the surveys were accepted without condi-tion. Table I presents the means, standard devi-ations, and correlations of the variables ofinterest.

Given the fact that some of the scales werecreated for this study and that some of the itemsfrom other scales were altered from their originalform, I next conducted a full confirmatory factoranalysis to estimate the convergent validity of theindividual constructs using LISREL 8.2 ( Joreskogand Sorbom, 1998). Results of the confirmatoryfactor analysis are presented in Table II. Generallyspeaking, each item loaded strongly on theindividual construct with which it was associatedexcept for the last organizational identificationitem. Since that scale was taken from the litera-ture and the loading of that item was not unusu-ally weak (0.30) I did not remove it from theanalysis. The overall χ2 of the five factor modelwas 274.77 (df = 179, p < 0.00), and thegoodness-of-fit statistics indicated a strong fit, aswell (GFI = 0.79, IFI = 0.90, RMSEA = 0.07).All of these results indicated acceptable conver-gent validity of the measures (Bollen, 1989).

Nevertheless, Table I revealed a relatively highcorrelation between cohesion and perceptions ofrelative organizational ethicality. Therefore, Iexamined the discriminant validity of those two

constructs. I created two models of the associ-ated nine items, a one factor solution and a twofactor solution. The χ2 of the one factor solutionwas 67.90 (df = 20), and the two factor solution’sχ2 equaled 53.45 (df = 19). The change in χ2

between the two models was 14.45, which wassignificant at p < 0.01 (df = 1) (Anderson andGerbing, 1988). Furthermore, the standardizedfit statistics were all much greater for the twofactor solution than for the one factor solution(∆CFI = 0.03; ∆NFI = 0.02, ∆RFI = 0.03)(Widaman, 1985). These figures indicated thatthe two factor solution fit significantly better thanthe one model solution and provided evidenceof discriminant validity between cohesion andperceptions of relative organizational ethicality.

Results

An initial exploratory analysis of the ther-mometer scale items provided evidence ofindividual biases about both the self and theorganization. The mean response on the thermo-meter scale that measured perceptions of selfethicality was +2.27. Given that sampling theoryargues that a random sampling of the populationshould lead to a mean of 0 (an averageemployee), the student’s t-test revealed a t valueof 10.38 (p = 0.00). Clearly, individuals in this


TABLE IMeans, standard deviations, and correlations

Mean s.d. 1 2 3 4 5 6 7

1. Perceived relative organizational ethicality †0.00† 0.85 –1.00

*2. Perceived relative self

ethicality †0.00† 0.77 *–0.27** –1.003. Organizational identification 3.32 0.64 –*0.39** –0.08 –1.004. Cohesion 3.20 0.83 –*0.73** –0.12 –**0.51** –1.00*5. Insulation 3.21 0.97 –0.14* –0.05 –0.15 –0.06* 1.006. Gender 0.48 0.50 –0.08* –0.04 –0.01 –0.02* 0.06 1.007. Company (dummy) 0.28 0.45 *–0.28** –0.04 *–0.26* –0.20* **0.27** 0.23* 1.00

n = 98.† Mean approaches zero because items were changed to z-scores for standardization.* Correlation is significant at the 0.05 level (2-tailed).** Correlation is significant at the 0.01 level (2-tailed).

sample saw themselves as more ethical thanothers in their organizations. There was also abias regarding perceived relative organizationalethicality. The mean response was +1.47. Giventhat a random sampling of the population shouldlead to a mean of 0 (an average organization), astudent’s t-test against the sample mean had at-value (t = 5.95) that was also significant at thep = 0.00 level. The nature of the relationshipbetween the two larger constructs, perceivedrelative self ethicality and perceived relative

organizational ethicality, was determined inregression analyses.

The perceived relative self ethicality variableand the organizational identification variableswere each centered and then multiplied togetherto create the interaction variable (Aiken andWest, 1991). Then, using the perceived relativeorganizational ethicality measure as the responsevariable, two regression models were created.Model 1 included the centered main effects,perceived relative self ethicality and organiza-


TABLE IIResults of full confirmatory factor analysis

Factors and items Standardized Scale Cronbach coefficient Alpha

Perceived relative organizational ethicality 0.91My company is more ethical than the average company 0.86My company is more ethical than most companies 0.82My organization is not as moral as most organizations (r) 0.74My company is less ethical than the average company (r) 0.83Thermometer scale 0.79

Perceived relative self ethicality 0.77At my company, I am more moral than many of the people in my area 0.58In my company, I am more ethical than the average employee 0.94I am more ethical than most of my co-workers 0.72Thermometer Scale 0.51

Organizational identification 0.76I am very interested in what others think about my company 0.45When I talk about my company, I usually say “we” rather than “they” 0.55When someone criticizes my company, it feels like a personal insult 0.83When someone praises my company, it feels like a personal compliment 0.84My company’s successes are my successes 0.64If a story in the media criticized my company, I would feel embarrassed 0.30

Perceived organizational cohesion 0.78The people in my company are very friendly towards each other 0.61At my company, there is a great deal of trust 0.81At my company there is a great deal of loyalty and a sense of

belonging among the employees 0.81

Insulation 0.70My job requires that I work with a lot of people from outside of

my organization 0.55In the course of my work, I deal with many people from outside

my company 0.95During the day, I interact mostly with people who are not employees

of my company 0.56

tional identification, cohesion, insulation, gender,and the dummy variable. In the second model,the interaction term was included to determineif its addition was justified.

Table III shows the results of both regressionequations. The addition of the interaction

variable created a significant change in the Fstatistic (∆F = 4.11, ∆R2 = 0.02, p < 0.05)thereby justifying its addition. Hence, model 2was accepted. In fact, the overall equation inmodel 2 appeared to be quite sound. A normalprobability plot revealed an acceptable fit and the


TABLE IIIResults of multiple regression analysis

Variable Model 1 Model 2

Perceived relative self ethicality (centered) –0.20∗∗ –0.20∗∗Organizational identification (centered) 0.06 0.10Perceived organizational cohesion 0.65∗∗ 0.61∗∗Insulation –0.10 –0.06Gender 0.09 0.11Company –0.12 –0.13∗Interaction –0.15∗∗

R2 0.60 0.62Adjusted R2 0.58 0.59∆F 22.91∗∗ 4.11∗∗

Figures are standardized coefficients.Response: perceived relative organizational ethicality.n = 98.∗ Figure is significant at the 0.10 level (2-tailed).∗∗ Figure is significant at the 0.05 level (2-tailed).

Figure 2. Interaction plot.

variance inflation factors were all below 1.8indicating that there were no problems withmulticollinearity.

As the results in Table III suggest, the stan-dardized regression coefficient of perceivedrelative self ethicality in model 2 was significant(p < 0.01) and negative. This provided supportfor hypothesis 1b. The interaction effect of per-ceived self ethicality and organizational identifi-cation was positive and significant (p < 0.05).This represented support for hypothesis 2. Inaddition, cohesion was a primary determinantof perceptions of relative organizational ethicality.Its standardized regression coefficient was positiveand significant (p < 0.01), thus supportinghypothesis 3. In fact, the R2 of the overall modelwas quite high, and simple post-hoc analysis ofthat fact indicated that cohesion was the prin-cipal determinant of that figure (∆R2 = 0.24).The results, however, did not support hypoth-esis 4 (p = 0.44)

Discussion

Overall the results support those hypotheses thatare grounded in a more thorough considerationof perceptions of relative ethicality. First, per-ceptions of relative self ethicality were signifi-cantly and negatively related to perceptions ofrelative organizational ethicality. Apparently, thetendency for individuals to perceive themselvesas more ethical than others influences their per-ception of the organization more generally, andgiven a belief that the world “out there” is apositive place, this leads to a perception that theorganization is a comparatively less ethical orga-nization. Technically, this contradicts Messick andBazerman’s original warning.

Furthermore, given this relationship betweenindividual and organizational perceptions, thissuggests that leaders of organizations are in adifficult if not paradoxical situation. On the onehand, the organization (for innumerable reasons)wants to employ individuals of strong mentalhealth. On the other hand, strong mental healthnormally includes a positive self-bias, which asthis research suggests, negatively impacts howthose individuals perceive their organization’s

relative ethicality. By hiring those individualswho are mentally healthy and are therefore in thebest position to make a contribution to the orga-nization more generally, the organization is alsoemploying people who will tend to think less ofthe organization’s ethicality. Perhaps such per-ceptions could be turned to the manager’sadvantage (e.g., by fostering a desire to improvethe ethics of the organization), but suchoutcomes would require an awareness of thisapparent paradox.

Still, Messick and Bazerman, perhaps drawingfrom their own anecdotal evidence, recognizedthat the bias that individuals hold about theirown self ethicality can under certain conditionslead to inflated perceptions of the organization’sethicality. The key, as indicated by the findingsfor hypothesis 2, lies in the moderating effectsof organizational identification. In order for thebias that an individual holds about his or her ownethicality to transfer to the organization asMessick and Bazerman suggested it might, theindividual must identify with the organization.In doing so, the individual does not perceive theorganization merely as a collection of employeeswho are less ethical than the individual, butrather as an extension of him- or herself. He orshe does not judge the organization as someexternal object or entity populated by otherpeople, but as he or she does the self. Whenorganizational identification is high, then, theindividual sees the self and the organization asessentially the same, and the bias that the indi-vidual holds about ethics is transferred to theorganization and its ethics. In terms of a directrelationship between organizational identificationand perceptions of relative organizational ethi-cality, causality may be a concern since thepropensity of an individual to identify with anorganization may be influenced by the perceivedethics of that organization. Regardless, theanalysis demonstrates that organizational identi-fication moderates the relationship between selfand organizational perception. Furthermore, itis interesting to note that seemingly non-ethicalevents (one of the organizational identificationitems identifies a pronoun preference, forinstance) are associated with the perceptions thatindividuals have of their organization’s ethicality.


In addition, general perceptions of the orga-nization captured in the concept of cohesion hada powerful influence on perceptions of organi-zational ethicality. The more the individual per-ceived the organization as a friendly and trustingplace to work, the more inclined the individualwas to see the organization as a relatively ethicalorganization. This is interesting because much ofwhat the field of business ethics concerns itselfwith are externally-oriented issues such asbribery, fraud, conspiracy, anti-trust, etc. And yet,according to this research, an employee’s opinionof the ethicality of his or her organization issignificantly impacted by his or her general per-ceptions of the internal atmosphere of theorganization. This suggests that a culture of ethicswhere caring and trusting behavior flourishes iscritical to being perceived by employees as anethical organization, perhaps even more so thantraditional “ethical” behaviors such as avoidingcriminal activities and making charitable contri-butions. Regardless, this is a promising area forfuture research.

Lastly, in retrospect it is not surprising thatinsulation did not influence perceptions ofethicality. Janis (1972, 1982) argued that insula-tion limits the information that groups have, andwithout information, they make poor decisions.This research addressed more than just decisionquality, though – it hypothesized a specific direc-tion, as well. Certainly, the lack of objectiveinformation that results from insulation mayreduce the quality of a decision, but exactly howinsulation will affect the direction of that decisionis not as clear. Insulation could affect an indi-vidual’s perception of the organization’s ethicalityin many different ways, and while we may beable to predict that the perception will be inac-curate or of poor quality determining whetherthat perception will be inflated or deflated appar-ently depends upon other variables.

Conclusion

This study is not without limitations. First,concerns may arise about the sample or its size.Even though nearly all of the participants workedfull-time, many of them were also graduate

students. Perhaps given their educational expe-riences and comparatively short tenures withtheir organizations their views on organizationalethics were not representative of the largerpopulation. Still, considering that the self-biasmeasures were consistent with the long stream ofresearch in this area, these findings may not beas limited in their generalizability as most studiesthat utilize students are purported to be.Furthermore, considering that their responseswere pooled with those of employees in a singleorganization, much of that limitation may havebeen negated. In terms of the sample size, giventhat the regression models used in the study didnot employ more than 7 factors, 98 respondentswere sufficient for the purposes of this research(Neter et al., 1996). Nevertheless, future researchcan seek to extend the generalizability of thesefindings.

Second, despite a strong precedent in theliterature, concerns about the form of the per-ception measures may arise. In particular, theitems were quite vague and imprecise. In thisresearch, though, these items were designed toreflect reality, not to define reality. As such, theitems discussed ethics and ethicality in a veryabstract manner, thus mirroring everydaylanguage and capturing the form by whichindividuals make sense of their experiences. So,while the items did not differentiate betweeninternal or external ethics or ethics as justice orcaring, for example, they did reflect how peopleunderstand their own and their company’s ethicalstatus. In that sense, the abstract wording of theitems effectively served its purpose.

Third, spurious relationships among some ofthe variables of interest may have emerged dueto common method (self reports) commonsource (the participants) variance (Campbell andFiske, 1959). Some of the observed results couldrepresent an artifact of the measurement proce-dures rather than meaningful relationships amongconstructs. From a practical perspective, however,this was the only reasonable approach to gath-ering this kind of data. In studying these kindsof variables, it is difficult if not impossible togather accurate data about the perceptions ofindividuals from any source other than directlyfrom the individuals themselves. Subsequently,


these limitations are an inherent difficulty ofstudying this topic. Nevertheless, such concernscan be partially addressed empirically, and theresults of the confirmatory factor analysis estab-lished the convergent and discriminatory validityof the variables of interest.

A final issue worth discussing is that ofcausality. The elements of a causal argument areassociation, temporal precedence and nonspuri-ousness (Cook and Campbell, 1979). Theresearch demonstrates an association betweenperceptions of self ethicality and perceptions oforganizational ethicality. In terms of temporalprecedence, I have assumed that a relationshipwith the self precedes a relationship with theorganization, and therefore perceptions of selfprecede perceptions of the organization. Ofcourse, perceptions are ongoing, and it is alsoreasonable to think that there is a strong degreeof mutual influence, but from an abstract viewtemporal precedence can be assumed. Withregards to nonspuriousness, the research makes alimited attempt to consider alternative explana-tions for the association. Thus, while theelements of a causal story exist, only theassociation between the constructs is establishedempirically. To strengthen the causal argumentsunderlying this research, future studies coulddemonstrate temporal precedence empiricallyand/or consider alternative explanations for theseassociations.

Despite any limitations, this research never-theless makes several contributions. First, it callsattention to perceptions of relative organizationalethicality and indicates the importance of under-standing such perceptions as a critical antecedentof behavior. Furthermore, this research empiri-cally examined a question that many scholarshave formally and informally considered: do per-ceptions of the self influence perceptions of the

organization? Indeed, the findings indicate thatperceptions about individual ethics do influenceperceptions about the organization’s ethics, butthat these relationships may be more complexthan they initially appear. Future research in thisarea will undoubtedly reiterate this point.

Finally, this research provides some practicalimplications. For instance, the findings suggestthat while individuals naturally tend to have abias about the relative ethicality of their organi-zations, that bias is tempered or even negated bya positive self image. In this sense, managers maybe limited in their ability to develop highlypositive perceptions of organizational ethicalityamong their employees. Perhaps instead,managers should help individual employees toidentify with the vision, mission, goals, andstructure of the organization. In so doing, theidentities of the individual and the organizationwill begin to blur and perceptions of organiza-tional ethicality will rise accordingly. Ifemployees can develop positive perceptions of theorganization’s ethics, this may serve as addedincentive to act in ways that are consistent withthe behavior of an “ethical organization.”

In addition, the study suggests that character-istics of the organization’s internal environmentmay be critical to the development of positiveemployee perceptions of organizational ethicality– as perceptions of cohesion in the organizationgrow, the employee tends to view other charac-teristics of the organization more favorably.Consequently, if managers want to improve theemployees’ overall perceptions of the organiza-tion’s ethicality, they may want to spend theirtime internally developing a trusting and caringenvironment rather than single-mindedlyfocusing their attention externally on “tradi-tional” ethical outcomes.


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Appendix A

Thermometer scale for perceptions of relative Self ethicality

Place an “X” on the line in the location that best completes the following statement:Compared to the other employees in my company, I am

the least ethical employee an average employee the most ethical employee

Thermometer scale for perceptions of relative organizational ethicality

Place an “X” on the line in the location that best completes the following statement:Compared to other organizations, my organization is

the least ethical organization an average organization the most ethical organization

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Perceptions of Organizational Ethicality: Do Inflated Perceptions of Self Lead to Inflated Perceptions of the Organization?