Janet S.
Adams
Codes of Ethics as Signals
for Ethical Behavior*
ABSTRACT. This study investigated effects of
codes of ethics on perceptions of ethical behavior.
Respondents from companies with codes of ethics
(n = 465) rated role set members (top management,
supervisors, peers, subordinates, self ) as more ethical
and felt more encouraged and supported for ethical
behavior than respondents from companies without
codes (n = 301). Key aspects of the organizational
climate, such as supportiveness for ethical behavior,
freedom to act ethically, and satisfaction with the
outcome of ethical problems were impacted by the
presence of an ethics code. The mere presence of a
code of ethics appears to have a positive impact on
perceptions of ethical behavior in organizations, even
when respondents cannot recall specific content of the
code.
KEY WORDS: codes of ethics, ethics climate, ethics
ratings, perceptions of ethical behavior, role set ratings
Concerns with organizational codes of ethics
have intensified in the 1990s. However, such
documents are not new organizational artifacts.
For example, the J.C. Penney Company “Penney
Idea” dates from 1913, and Johnson & Johnson’s
corporate ethics statement originated in the
1940s (Oliverio, 1989). Studies in the 1950s
found between 15 and 40 percent of large
Janet S. Adams is Associate Professor of Management and
Entrepreneurship at Kennesaw State University. Her
recent research focuses on individual responses to ethical
dilemmas in organizations.
Armen Tashchian is Professor of Marketing at Kennesaw
State University. His published work includes work on
consumer behavior, research methods and ethics.
Ted H. Shore is Associate Professor of Management at
Kennesaw State University. His main research focus is
on human resource management issues.
Journal of Business Ethics 29: 199–211, 2001.
© 2001 Kluwer Academic Publishers. Printed in the Netherlands.
Armen Tashchian
Ted H. Shore
companies reporting ethics codes (Fulmer, 1969).
By 1992 the proportion had increased to 93
percent of U.S. firms surveyed (Center for
Business Ethics, 1992) and 83 percent of firms
in North America and Europe (Berenbain, 1992).
Thus, the norm for large U.S. firms in the 1990s is
to have a written code of ethics or conduct. Data on
codes in small companies are not readily available, and
since small businesses employ 53 percent of those
working in private businesses in the U.S. (SBA, 1997),
a significant proportion of U.S. employees may work
in organizations without written codes of ethics.
Smaller organizational size is associated with less
formalization in organizational procedures, including
the adoption of a formal ethics code.
Companies have codes for a number of
reasons. Ethics codes are one attempt to improve
the organizational climate so that individuals can
behave ethically (Shaw and Barry, 1995). Both
Arrow (1974) and Stone (1975) noted that ethical
controls are necessary because the legal system
and markets do not necessarily lead to organiza-
tional behavior that takes into consideration
moral impacts of business decisions. Others have
argued that companies need codes in order to
establish business as a profession similar to
medicine or law; ethics codes are one marker of
professions. Codes of ethics can also be viewed
as attempts to institutionalize the morals and
values of the company founders such that they
become part of the corporate culture and help
socialize new individuals into the culture (Weiss,
1994). Stevens (1994, p. 68) suggests ethics codes
are messages. Therefore, the relevant questions
are: “Do they work? Are the codes communi-
cated in meaningful ways? Are employees aware
of their organization’s ethical code and accepting
of its guiding principles?”
200 Janet S. Adams et al.
The large increase in companies adopting
codes of ethics since the 1970s, however, can be
traced to more pragmatic concerns. Growing
international and domestic business scandals of
the 1970s and 1980s led companies to institute
codes of ethics as symbols to both internal and
external stakeholders of their commitment to
ethical practices (Murphy, 1995). Ethics codes are
managerial and legal tools. Since corporations
can be held legally responsible for the actions of
employees, managers enact codes to guide indi-
vidual behavior and to protect the corporation
from the illegal and unethical behavior of
employees. The 1991 Federal Sentencing
Guidelines encouraged the establishment of
ethics codes as part of a comprehensive ethics
program; they allow reduced fines for organiza-
tions found guilty of wrongdoing if they can
show they enacted and communicated ethics
codes to employees (Rafalko, 1994). Some codes
are thus legal self-defense mechanisms. They can
be much more, however. Managers may use
codes to shape change and to send messages
about expectations of standards that go beyond
behavior required by law. Thus codes may be
serious attempts to articulate the moral climate
that is part of the organization’s culture (Stevens,
1994).
Despite the prevalence of ethics codes in large
organizations, there is relatively little empirical
evidence regarding the effectiveness of codes of
ethics on perceptions and behavior in organiza-
tions (Trevino and Nelson, 1995; Kaye, 1992),
or even of individuals’ understanding and recall
of the content of such codes (Weaver, 1995).
Thus, in this paper our purpose is to explore
employee perceptions of differences in the
organizational context of companies with and
those without codes of ethics. Our research was
guided by these questions: (1) what do employees
recall about the contents of their companies’
codes of ethics? and (2) does a code of ethics have
an impact on perceptions of the ethical climate
of organizations?
Individual and organizational influences
on ethical behavior
Explanations for unethical behavior have long
focused on individual variables. However,
researchers have pointed out that situational
factors may be at least as important as individual
characteristics, or the interaction of individual
and organizational context may better explain
ethical lapses than either factor alone (e.g.,
Trevino, 1986). More recently, some have sug-
gested that the kind of moral issue and its
expected consequences also determine what
action is taken (Collins, 1989; Jones, 1991;
Weber, 1994).
“Ethical lapses and illegal behavior are not the
domain of some sleazy firms operating at the
fringes of otherwise respectable and responsible
companies” (Sethi, 1994, p. 804). Since uneth-
ical behavior in organizations is so widespread,
it has been suggested that such behavior may be
caused by something in the organizational
context itself, rather than representing the mis-
behavior of a few “bad apples.” But when an
individual behaves unethically, attribution theory
suggests we tend to frame individuals as causal
agents, making personal attributions to explain
the behavior rather than assuming that something
in the environment may be encouraging the
dishonest behavior. This occurs because our
worldview frames people as causal agents rather
than seeing environmental influences for good
or bad behavior (Messick and Bazerman, 1996,
p. 15).
A great deal of research on organizational
ethics has used the Kolberg construct of cogni-
tive moral development to explain why some
individuals behave ethically in organizations and
others do not (Fraedrich, Throne and Ferrell,
1994). However, a number of recent studies (e.g.,
Adams and Tashchian, 1995; Fraedrich and
Ferrell, 1992; Weber, 1990) suggest an indi-
vidual’s level of moral development may not be
a good predictor of ethical decisions made in
work contexts. Fraedrich et al. (1994) summa-
rize extensive research support for the view that
employees do not make highly individual deci-
sions regarding ethics in organizations. Further,
individual decisions may be moderated by
 Codes of Ethics as Signals for Ethical Behavior
organizational variables. Jones and Hiltebeitel
(1995) found, for example, that ethical decision
making of accountants was affected by organiza-
tional expectations and support. In a pair of
laboratory studies, Hegarty and Sims (1978,
1979) found unethical behavior increased with
level of competitiveness and with rewards for
such behavior. But ethical behavior was more
likely when there was an organizational ethics
policy. These findings suggest that shared per-
ceptions of the organization’s policies and prac-
tices may be part of an organizational culture
influence on ethical behavior.
Regardless of the individual’s ability to make
moral judgements, in the organizational setting
there are strong pressures to conform to the
expectations of managers and peers. Results of
a laboratory study by Weber (1990) showed
managers’ level of moral reasoning depressed
by context. Actions recommended in those
dilemmas set in organizations were justified using
lower levels of moral reasoning than those
dilemmas set in other contexts.
Trevino (1986) argued that ethical decisions
are the result of the interaction of the person and
the situation. Trevino and Nelson (1995) classify
the recipients for the message of the ethics code
as “good soldiers,” “loose cannons” and
“grenades.” Good soldiers know the rules and
follow them, so an ethics code simply lets this
group know what behavior is expected; for them
the code offers support. Loose cannons mean
well but are naive. They may be new, inexperi-
enced, or simply not familiar with the organiza-
tion’s policies; they need to be educated in the
code. The grenades may or may not be aware of
what the ethics code says, but they have their
own agenda and no moral compass. Strong
sanctions included in the code let grenades know
unethical behavior will not be tolerated. Thus,
a code of ethics may meet different needs of
different employees. For the good soldiers, it
provides legitimacy and support for ethical
behavior; for the loose cannons, it provides
guidance about expected behavior and raises
moral issues in the business context; for grenades,
sanctions for unethical conduct may serve as a
deterrent. The mere presence of a code therefore
sends a message to all employees. Although most
201
employees may not read policy manuals or ethics
codes in their entirety but, rather, consult them
when they have a question, just the knowledge
that the code exists may send messages that
influence behavior.
Taken together, the research on individual
versus organizational impacts on ethical behavior
suggests that organizational context is an over-
riding influence on individual moral decisions
made in organizations. Although individuals
may be capable of quite sophisticated levels of
moral reasoning, the perceived consequences of
behavior, the impact of managers’ and peers’
expectations and their influence as role models,
the focus on profit as a significant expected
outcome, the interdependencies created by
organizational roles, the individual’s economic
dependence on the employing organization, even
cultural beliefs about the value of economic
success: all these elements exert a powerful
influence on individual decisions. Adams and
Tashchian (1995) found that justifications given
for decisions made in actual ethical dilemmas
people had experienced at work were mostly at
Kohlberg’s lowest level. The majority of both
men and women justified their decisions by
preconventional reasoning – fear of punishment
or expectation of reward. Thus, the individuals
attributed their decisions to their organizations’
reward structure and their dependence on that
system.
As Stephens (1994) noted, codes of ethics
send powerful messages about the organization’s
expectations. In Trevino and Nelson’s (1995)
terms, the code legitimizes the good soldiers’
behavior, teaches the loose canons what behavior
is appropriate in the organization, and warns the
grenades of sanctions for unethical behavior. The
mere presence of a code is an indication that
management places some value on ethical
behavior; that moral considerations have a place
in the organization’s functioning; and that con-
sequences, positive and/or negative, may be
attached to the ethical dimensions of organiza-
tional behavior. On the other hand, absence of
an ethics code may be read as a message that
management does not consider ethics important
or that management has not even considered this
component of behavior.
202 Janet S. Adams et al.
Most of the research on ethics codes has
focused on single codes (e.g., Rogers and Swales,
1990) or examined code content through content
analysis (e.g., White and Montgomery, 1980;
Chatov, 1980; Cressey and Moore, 1983).
Although the mere presence of a code of ethics
is assumed to be a good thing, Toffler (1991)
notes that codes do not necessarily help
employees act ethically in the complex situations
they face in their jobs, nor does the presence of
a code indicate managerial understanding of the
kinds of issues employees face. Nevertheless,
managers do report that the presence of policies
on ethical behavior “makes dealing with ethical
situations less painful” (Toffler, 1991, p. 25). The
presence of a code serves to direct attention to
personal accountability and ease fears about
consequences for certain actions.
On the other hand, the presence of a code
may create unintended consequences, such as a
feeling of being relieved of responsibility for
understanding the complexity of a moral issue
and finding the best resolution. If employees
believe they can simply “follow the book,” they
may feel a diffusion of responsibility for their
own actions and discount their individual moral
and managerial judgment (Toffler, 1990). Trevino
and Nelson (1995, p. 205) conclude that the
mere existence of an ethics code will not solve
a company’s ethics problems and “may actually
cause problems if it is implemented without
attention to the rest of the ethical culture” by,
for example, creating cynical workers who
observe behavior that is not aligned with the
stated code. Failure to distribute the code widely
throughout the organization and/or failure to
enforce the code may heighten perceptions of
misalignment between words and deeds.
As this review indicates, codes of ethics are
widely adopted, at least in larger American
companies. However, organizations have had to
rely primarily on anecdotal evidence and pre-
scriptive recommendations for assessing the
effectiveness of the codes they have. There
appears to be little empirical evidence to support
or refute the often conflicting recommendations
made in the literature. We therefore undertook
this study to provide empirical evidence
regarding perceptions of behavior in organiza-
tions that have a written code of ethics and those
that do not. Specifically, we compared individ-
uals’ perceptions of the ethical behavior of
members of their work role sets (top manage-
ment, supervisors, peers, subordinates, and self )
and key aspects of the organizational climate,
such as supportiveness for ethical behavior,
freedom to act ethically, and satisfaction with the
outcome of ethical problems. Finally, we col-
lected and classified respondents’ recollections of
the contents of their organizational codes. In the
absence of a generally accepted definition of
ethical climate in organizations, we do not
present specific hypotheses to be tested; rather,
at this point our focus is on determining whether
or not the presence of an ethics code affects
employee perceptions of the organizational
context.
Methods
Data collection
Data were collected through structured inter-
views with 766 subjects over a two-year period.
The interview guide consisted of forty closed-
ended questions and eleven open-ended ques-
tions. After the interview, interviewers recorded
answers to all open-ended questions in detail.
Anonymity was promised respondents, and
neither companies nor individuals were identi-
fied on the interview form. Interviewers were
132 graduate students, the majority of whom
were employed and attending an evening MBA
program. As part of group projects investigating
ethical issues at work, graduate organizational
behavior classes read and discussed articles on
ethics and on effective interviewing, received
instruction in interviewing techniques, and
engaged in detailed supervised practice inter-
views.
Interviewers selected subjects by identifying
employed individuals who acknowledged they
had experienced an ethical dilemma at work and
were willing to discuss their experience. To avoid
potential problems for the interviewers, they
were instructed not to interview individuals at
the company where they were currently
 Codes of Ethics as Signals for Ethical Behavior
employed. They were also instructed to ask
respondents not to report incidents involving
illegal behavior, a requirement of the Institutional
Review Board for Research with Human
Subjects at the authors’ university.
The data collection procedures described
above had multiple objectives. First, this approach
resulted in a larger sample size than would be
feasible using a small number of interviewers, and
increased the population from which the sample
was drawn. Second, interviewers were able to
select subjects who were willing to talk with
them about sensitive issues they might be hesitant
to discuss with a stranger. The use of interviews
rather than questionnaires allowed for probes and
clarification of ambiguous or incomplete
responses. Finally, the use of actual incidents
provided by the respondents rather than indi-
vidual responses to hypothetical scenarios
addresses an ongoing problem in business ethics
research.
Coding
Coding categories for open-ended questions
were developed from a review of the business
ethics literature and content analysis of responses
to the 89 pilot interviews used for pre-testing the
interview guide. Open-ended questions for this
study included the following:
If, in the ethical dilemma you’ve discussed with
me, you felt you did not have complete freedom
to do what you thought was right, what limited
your freedom?
In addition, for those who reported their orga-
nization had a formal, written code of ethics we
asked:
What is included in your company code of
ethics?
Up to three response categories were recorded
for these open-ended questions, a practice which
captured total responses made in all but 14 cases.
The response categories were inductively created
using the subjects’ own words. We then looked
for recurring patterns in the data, which we
203
sorted into categories characterized by internal
homogeneity and external heterogeneity (Miles
and Huberman, 1984). This procedure followed
the Glasser and Strauss (1967) process for “dis-
covery of grounded theory,” an appropriate
strategy for exploratory research (Van Maanen,
1983).
Measures
For this analysis respondents were divided into
two groups. Group 1 included respondents
employed in an organization with a formal,
written code of ethics (n = 465, 60 percent).
Those in Group 2 had no such code, or were
unsure whether such a code existed (n = 301,
40 percent). Subjects were asked to rate the
ethical behavior of their work role set members:
top managers, supervisors, peers, subordinates
and themselves. For ethical behavior, they could
use any positive number from 1 to 100, with 100
being totally ethical. For unethical behavior, they
could use any negative number between –1 and
–100, with –100 being totally unethical. Rating
of company support for ethical behavior was on
a four-point Likert-type scale anchored by
extremely supportive and not at all supportive.
All respondents described “the most serious or
troubling ethical dilemma [they] had ever faced
in [their] work lives.” Three scaled-response
follow-up questions regarding that incident were:
Did you feel pressure or expectations from others
in this situation to choose an unethical course of
action? (yes or no response)
How satisfied were you with the outcome of
this incident? (very dissatisfied to very satisfied)
How much freedom do you feel you had to do
what you thought you should do in this incident?
(none at all to total freedom)
These questions were followed by an open-ended
question if warranted by the subject’s response.
Thus, those who reported being constrained by
pressure or expectations were asked to describe
those factors, and those who felt their freedom
was constrained were asked to identify the con-
straining factors. Responses to open-ended ques-
tions were coded by the process described
204 Janet S. Adams et al.
previously in this section for other open-ended
questions.
Results
Respondent profile
Respondents from organizations with a written
code (Group 1) did not differ significantly from
those in organizations without codes (Group 2)
on the following variables: level in the company
(similar proportions of top management, middle
management, front-line supervisors, and non-
managers), sex (60 percent male), years of work
experience (mean = 10 years), or age (mean =
31 years) (Table I).
Respondents employed by organizations that
had a formal, written code of ethics had longer
tenure with the company (Group 1 mean = 5.8
years, Group 2 mean = 3.9 years; F = 17.67,
p < 0.001), and they worked for much larger
companies (Group 1 companies averaged 17,284
employees; Group 2 companies averaged 2,808
employees; F = 16.3, p < 0.001). There were also
significant differences in industries. More Group
1 individuals were employed in manufacturing,
financial services, insurance or real estate,
government, and communications. Group 2
respondents were more likely to be employed in
construction and social services (χ2 = 69.2, p <
0.001). Group 1 respondents averaged higher
education (χ2 = 20.3, p < 0.001) and were
employed in different functional areas (χ2 = 14.1,
p = 0.049).
Ratings of role set members
Analysis of variance shows that individuals
employed in organizations with written codes of
ethics consistently rated the ethical behavior of
every member of their work role set higher
than did those in organizations without codes
(Table II). The difference is most striking in the
ratings of top managers and supervisors. Group
1 respondents assigned their top managers an
average score of 45.7, while those in group 2
averaged 17.0 (F = 41.4, p < 0.001). Supervisors
in Group 1 received an average rating of 39.4
whereas Group 2’s mean was 12.6 (F = 31.9,
p < 0.001). Thus, top managers and supervisors
in companies with ethics codes scored an average
of 28 points higher than those from companies
without codes.
Differences in ratings of peers, subordinates
and self were not as dramatic but were statisti-
cally significant. Peers of Group 1 respondents
received an average rating of 51.1, while peers of
Group 2 subjects were rated an average of 33.6
(F = 24.04, p < 0.001). Group 1 respondents also
rated their subordinates higher than Group 2
(Group 1 mean = 49.4, Group 2 mean = 41.7;
F = 3.8, p < 0.05). Furthermore, differences in
self ratings were also found (Group 1 mean =
73.3, vs. Group 2 mean = 67.9 (F = 4.9, p <
0.01). Although subjects could use negative
numbers to indicate unethical behavior, and
many assigned negative numbers to some indi-
viduals, all the average ratings are positive
numbers.
Perceptions of support, pressure, freedom and
satisfaction
Individuals from companies having a formal code
of ethics rated company support for ethical
behavior higher (χ2 = 128.5, p < 0.001) and
reported higher levels of satisfaction with
outcomes of the ethical dilemmas they had faced
(χ2 = 11.2, p < 0.01). Perceptions of pressure to
behave unethically were only marginally higher
in companies that have no code (χ2 = 3.25, p =
0.05). There was no significant difference
between the two groups in reported perception
of amount of freedom to act in the way they
thought they should act when they were faced
with an ethical dilemma (Table III).
Perceived sources of limits to freedom
Although subjects in organizations without codes
did not differ in perceptions of their level of
freedom to act, those who did feel limited
identified different constraints to their freedom
(χ2 = 31.5, p < 0.001). Individuals in organiza-
 Codes of Ethics as Signals for Ethical Behavior 205

TABLE I
Demographics of the sample

Group 1 Group 2 Test statistic

(Code present) (No code present)
N = 465 N = 301

Sex
Male 258 (56%) 158 (52%) χ2 = 1.27 n.s.
Female 206 (44%) 149 (48%)

Level of education
High school grad 045 (10%) 038 (12%) χ2 = 20.31***
Some college, no degree 084 (18%) 073 (24%)
Undergraduate degree 214 (46%) 154 (51%)
Some graduate work 058 (13%) 023 0(8%)
Graduate degree 063 (14%) 017 0(5%)

Functional area of employment

Accounting 034 (11%) 034 (11%) χ2 = 14.10*
Engineering 035 (11%) 014 0(7%)
Finance 041 (14%) 015 0(7%)
General management 052 (17%) 043 (21%)
Marketing/Sales 094 (31%) 076 (36%)
Personnel 034 0(1%) 016 0(8%)
Sales management 017 (16%) 011 0(5%)

Industry
Communication 021 0(5%) 008 (10%) χ2 = 69.2***
Construction 003 0(1%) 013 0(5%)
Education 025 0(5%) 013 0(5%)
Financial services 052 (12%) 019 0(7%)
Government 046 (11%) 003 0(1%)
Health care 039 0(9%) 035 (12%)
Hospitality 031 0(7%) 037 (15%)
Insurance/Real estate 038 0(9%) 019 0(7%)
Manufacturing 112 (25%) 056 (20%)
Social services 011 (03%) 022 0(8%)
Wholesale/Retail 062 (14%) 062 (22%)

Level
Top management 033 0(7%) 035 (12%) χ2 = 4.47 n.s.
Front-line supervisor 079 (17%) 051 (17%)
Middle management 118 (26%) 072 (24%)
Non-management 231 (50%) 144 (48%)

Number of employees 17,284 2,808 F = 16.31***

Years of work experience 000,10.3 0,009.3 F = 2.53 n.s.

Years with the company 000,05.8 000,3.9 F = 17.67***

Age 000,31.7 0,030.5 F = 3.12 n.s.

*** p < 0.001; * p < 0.05.

206 Janet S. Adams et al.

TABLE II
Mean ratings of ethics of individuals in role set

Group 1 Group 2 Test statistic

(Code present) (No code present)
Mean (SD) Mean (SD)
N = 465 N = 301

Top management 45.66 (55.17) 17.03 (66.23) F = 41.36***

Supervisors 39.40 (61.41) 12.56 (65.40) F = 31.91***
Peers 51.05 (43.10) 33.59 (53.99) F = 24.04***
Subordinates 49.38 (43.80) 41.71 (47.61) F = 3.82*
Self 73.25 (31.72) 67.85 (35.18) F = 4.88**

*** p < 0.001; ** p < 0.01; * p < 0.05.

(H scale range = –100 to +100).

TABLE III
Ratings of support, freedom, satisfaction and pressure

Group 1 Group 2 Test Statistic

(Code present) (No code present)
Mean (SD) Mean (SD)
N = 465 N = 301

Company’s support for ethical behavior

Extremely supportive 194 (42%) 056 (19%) χ2 = 128.45***
Moderately supportive 204 (44%) 093 (31%)
Not very supportive 055 (12%) 095 (32%)
Not at all supportive 012 0(3%) 057 (19%)

Amount of freedom to act in desired way

Total freedom 158 (34%) 098 (32%) χ2 = 2.37 n.s.
A lot of freedom 092 (20%) 053 (17%)
Some freedom 082 (18%) 055 (18%)
Very little freedom 075 (16%) 061 (20%)
None at all 057 (12%) 039 (13%)

Satisfaction with Outcome of Dilemma

Very satisfied 151 (33%) 077 (25%) χ2 = 11.17**
Slightly satisfied 090 (19%) 056 (18%)
Neither 070 (15%) 041 (13%)
Slightly dissatisfied 043 0(9%) 048 (16%)
Very dissatisfied 110 (24%) 083 (27%)

Presence of pressure to behave unethically

Yes 324 (70%) 231 (76%) χ2 = 3.25*
No 142 (30%) 075 (24%)

*** p < 0.001; ** p < 0.01; * p < 0.05.

 Codes of Ethics as Signals for Ethical Behavior 207

tions with formal codes were more likely to TABLE IV

report “no limits” to their freedom and were less Recollected content of code of ethics
likely to fear they would lose their jobs if they
acted. Those respondents in companies without Content recalled Number
ethics codes more frequently said they were (PCT)
limited in doing what they felt they should do
Honesty, respect, ethics 223 (49.6%)
by direct orders or intimidation from others and Work rules/procedures 110 (24.4%)
because of low power or status in the organiza- Relations with customers/clients 080 (17.8%)
tion. They also more frequently said company Don’t remember anything 049 (10.9%)
policies limited their freedom. Protect trade secrets/proprietary info 049 (10.9%)
Compliance with regulatory
requirements 047 (10.4%)
Contents of ethics codes No sexual harassment 036 0(8.0%)
Relations with vendors/suppliers 031 0(6.9%)
When asked what their company code of ethics Don’t steal 028 0(6.2%)
contained, most respondents had difficulty citing Dress code 024 0(5.3%)
specific behaviors that were required or prohib- Consequences for violation of
ethics code 022 0(4.9%)
ited by the code (Table IV). Almost half those
Other illegal activities 013 0(2.9%)
responding to this question (49.6 percent) Procedures for reporting unethical
reported the code content dealt generally with behavior 012 0(2.7%)
honesty, respect and ethics. About a quarter said Medical ethics 011 0(2.4%)
the code contained work rules and procedures, Civic and community relations 009 0(2.0%)
and smaller numbers said it dealt with customer Internal control procedure 009 0(2.0%)
relations. Almost 11 percent stated they could not
Total number of responses 449
remember anything the code contained. Only 36
(8 percent) mentioned their code prohibited
sexual harassment, and 49 (11 percent) recalled
the code dealt with protection of trade secrets and felt somewhat less pressure to behave uneth-
and proprietary information, while 47 (10 ically than respondents from companies without
percent) remembered the code required compli- an ethics code. Furthermore, respondents in
ance with regulatory requirements (Table IV). companies with an ethics code perceived fewer
restrictions on their ability to behave ethically
and were less likely to feel intimidated and
Discussion threatened for behaving ethically.
These findings suggest very clearly that an
This study found the existence of a corporate organizational code of ethics impacts employee
code of ethics affected both employee ethical perceptions and behavior. Perhaps ethics codes
behavior and perceptions of ethics in several serve to heighten awareness and sensitivity to the
ways. Respondents who worked for companies importance of ethical behavior. More than the
having a code of ethics judged subordinates, co- code itself, the process of developing and intro-
workers, themselves and especially supervisors ducing the ethics code may be what increases
and top managers to be more ethical than awareness of ethical issues. The presence of a
respondents employed in organizations not code may signal that ethical behavior is a
having a formal code of ethics. Employees in company value and thus provide psychological
companies with an ethics code also gave higher support for and/or lessen concerns about
ratings of company support for ethical behavior, negative consequences for behaving ethically. A
reported higher levels of satisfaction with formal ethics code may thus legitimize ethical
outcomes of ethical dilemmas, more frequently behavior for those already inclined in that
reported being encouraged to behave ethically, direction. The presence of an ethics code may
208 Janet S. Adams et al.
also serve as a formalized advance warning via
the threat of negative sanctions and thus dissuade
certain people from violating its principles. Thus,
the code may act as a signal that unethical
behavior will not be tolerated.
A code of ethics also provides a context for
behavior by contributing to an organizational
climate in which ethical behavior is expected and
encouraged. In organizations lacking an ethics
code, individuals may behave less ethically than
their personal level of moral development would
dictate, with their individual preferences over-
whelmed by the organizational environment.
Weber’s (1990) finding, that individuals reported
lower levels of moral reasoning in scenarios set
in business contexts, supports this interpretation.
Conversely, employees with relatively low levels
of moral development may feel compelled to
behave more ethically than they would otherwise
due to the mere presence of an ethics code.
Thus, codes of ethics could provide a moral
compass by which individuals can self-monitor
and regulate their behavior, resulting in increased
consistency in ethical decision-making and
actions.
Codes of ethics may also influence behavior
by creating dialogue among employees about
ethical issues. Fisher (1993) argues that commu-
nication about ethical issues “before people take
action provides the most promising route to
improved ethical quality.” Waters (1988) asserts
that maintaining discussion about ethics in orga-
nizations requires that senior managers provide
leadership by signaling the importance they place
on ethics. Carroll (1989) maintains that a formal
code of ethics is a key symbol that top manage-
ment can provide to show their commitment to
ethical behavior.
Our findings suggest that the mere presence of
a code of ethics is more important than the
content of the code per se. In fact, we found that
although most respondents could not recall
specific features of their company’s ethics code,
employees of companies having a code had very
different perceptions of ethical climate and
behavior than employees of companies lacking a
code. In a laboratory study Weaver (1995) found
that recall of the content of an ethics code was
not facilitated by the inclusion of rationales and
sanctions in the code. This result also suggests
that ethics codes may influence behavior more
by generally legitimizing and communicating the
importance of appropriate behavior than by
educating employees about what specifically con-
stitutes ethical behavior. The presence or absence
of a code thus may act symbolically. If there is a
code of ethics and employees are aware of its
existence, then whether or not they can recall
specific items contained in the code, their per-
ceptions of the organizational environment are
affected. If there is a code, then employees
believe that ethical behavior matters in this
organization. If there is no code, then employees
may conclude that this organization and its
managers are not too concerned with ethical
issues. Thus, the presence or absence of the code
takes on symbolic significance; it serves as a signal
to employees as to whether or not the organiza-
tion is concerned with ethics. The fact that the
mere presence of the code appears to impact
perceptions of the ethical behavior of role set
members (including the self ), for example,
supports this contention of the communicating
power of the presence or absence of an ethics
code. The fact that most of our respondents
could not recall their codes’ specific content
strengthens our argument that the codes’ primary
function may be to signal whether or not ethical
behavior is expected in the organization.
It is not surprising that employees of com-
panies with a formal code of ethics were more
likely to feel encouraged and less likely to feel
discouraged to behave ethically than those in
companies without a code. Perhaps a code of
ethics represents one manifestation of a core set
of values of top management. The fact that
employees from organizations with and without
an ethics code report clear differences in the
degree to which ethical behavior is encouraged
suggests that companies with codes take the issue
of ethics seriously. That is, it is encouraging that
an ethics code in not merely a token; rather,
ethics codes appear to be a sincere reflection of
company values. On the other hand, a code of
ethics which is disregarded by management or
contradicted through the organization’s reward
system may result in cynicism and skepticism
among employees.
 Codes of Ethics as Signals for Ethical Behavior
In this study, we relied upon perceptions of
ethical behavior of role set members (co-workers,
subordinates, supervisors, and managers) as the
primary data source. Individual perceptions of
ethics of others are important since they have a
direct link to one’s own actions. Thus it appears
that perceptions of others’ ethical behavior,
particularly managers, will set the ethical tone for
the rest of the organization. It is noteworthy that
the greatest differences in perceptions of ethical
behavior were found among supervisors and top
managers from companies with versus those
without an ethics code. These differences in
perceptions of the ethics of company manage-
ment may account for many of the other
differences found between the two groups of
respondents.
Our study has a number of limitations. The
sample is not random. However, the large sample
size and the mix of industries and company sizes
leads us to have some confidence that the
findings may be representative. More importantly,
the use of structured interviews and the subjects’
willingness to discuss sensitive issues with the
interviewers gave access to some depth of
information not available in methods frequently
used in business ethics research, especially when
such studies are based on paper and pencil
responses to hypothetical situations. Respondents
here were discussing their actual experiences of
ethical dilemmas in specific organizations. The
interviewers’ acquaintance with the subjects
could have biased what respondents were willing
to talk about, especially in areas where subjects
were discussing instances of their own behavior
that could be disapproved by the interviewers.
However, analysis of the data reported elsewhere
(Adams and Tashchian, 1995) showed that the
majority of the respondents justified the actions
they had taken on the basis of preconventional
reasoning, the lowest level in Kohlberg’s classifi-
cation of moral reasoning. Thus, they appear not
to have been responding with a social desirability
bias. Interviews in which care is taken to develop
rapport, aided in these cases by some acquain-
tance prior to the interviews, have been shown
to result in frank discussion of issues which are
otherwise very difficult to access (e.g., Redding,
1990).
209
A further weakness of this study is the use of
unvalidated measures. However, measures of
ethical behavior of role set members, support for
ethical behavior, freedom to act, satisfaction with
the outcome, and pressure to behave unethically
all have face validity as measures of perceptions
of these variables. They have the limitations of
all self-report data on perceptions. Finally, our
study’s design does not enable us to rule out
alternative explanations for our findings. It is
possible that some of the differences in the
respondents in the two groups could account for
the different perceptions of the organizational
contexts. Subjects in companies with codes of
ethics had somewhat longer company tenure and
more education and came from a different mix
of industries and from larger companies.
Company size, it may be argued, could account
for the findings, but we believe the factor in size
that matters is the degree of formalization: is
there or is there not a formal code of ethics?
Our results suggest a number of areas for
future research. Greater understanding is needed
of the process by which corporate ethics codes
influence employee behavior. For example, it
would be valuable to know whether systematic
differences in employee moral development exist
in companies that have versus those that do not
have a formal ethics code. If such differences
exist, this would lend support to the hypothesis
that level of moral development affects whether
an individual seeks employment with organiza-
tions that demonstrate a commitment to ethical
behavior by having a formal ethics code. An
alternative hypothesis is that companies with a
formal ethics code may, because of their com-
mitment to ethical behavior, be attracting
employees that have higher ethical standards.
A second area where research is needed is on
the effects of characteristics of the code of ethics.
It would be valuable to understand if and how
ethics codes vary as a function of industry, size
and other organizational characteristics. It would
also be valuable to know if particular types of
ethical codes are more influential on employee
behavior. A final suggestion for future research
is to include additional types of measures of the
effects of ethics codes. A limitation of the present
findings is reliance on employees’ perceptions of
210 Janet S. Adams et al.
ethical behavior as the sole measure of the impact
of ethics codes. Future research should attempt
to gather direct behavioral evidence, such as
critical incidents of ethical behavior, on the
effects of the content of ethics codes.
In summary, our findings suggest that the
existence of a corporate code of ethics has a sig-
nificant influence on the perceptions employees
have about ethics in their organization. One
implication of these findings is that government
pressure on companies to develop ethics codes
(through the 1991 Federal Sentencing
Guidelines) may be an instance in which gov-
ernment intervention has a positive effect on
business. It is also possible that the existence of
codes of ethics in public institutions could
increase public confidence in their functioning.
Although further research is needed on various
design features of ethics codes, it appears that the
most critical issue is whether or not an organi-
zation has a formal code of ethics.
Note
* An earlier version of this paper was presented at
the Southwest Academy of Management Meetings,
Houston, Texas, March 1999. Revision submitted to
the Journal of Business Ethics November, 1999.
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Janet S. Adams and Ted H. Shore
Department of Management,
Coles College of Business Administration,
Kennesaw State University,
1000 Chastain Road,
Kennesaw, Georgia 30144,
U.S.A.
Email: Janet_Adams@Coles2.Kennesaw.edu
Armen Tashchian
Department of Marketing,
Coles College of Business Administration,
Kennesaw State University,
Email: Armen_Tashchian@Coles2.Kennesaw.edu