Understanding the Foundations: Organizational Culture versus Organizational Climate

In this section, we draw on prior research to distinguish between the concepts of organizational culture and organizational climate, with the aim of providing a foundation for the conceptualization of ethical culture. Although researchers have at times used the terms climate and culture interchangeably in their study of organizations, the consensus is that they are distinct (James et al., Reference James, Choi, Ko, McNeil, Minton, Wright and Kim2008; Turnipseed, Reference Turnipseed1988). Prior research has statistically distinguished between the two constructs through factor analysis (Glisson & James, Reference Glisson and James2002). Whereas organizational climate has been defined as the shared meaning attached to events, policies, practices, and procedures experienced by members of an organization, organizational culture has been defined as the shared values, beliefs, and assumptions that emerge through socialization between members of an organization (Ehrhart, Schneider, & Macey, Reference Ehrhart, Schneider and Macey2013). In other words, whereas climate develops in a more visible and tangible way because of organizational policies, rules, and procedures, culture manifests because of interaction between members of the organization, as well as interaction with the environment, through myths, symbols, and artifacts specific to an organization (Kuenzi et al., Reference Kuenzi, Mayer and Greenbaum2020). Furthermore, whereas climate is temporal and subjective and may be influenced by individuals in positions of power, culture builds slowly over time and is rooted in an organization’s history (Denison, Reference Denison1996).

While acknowledging their distinctiveness, it has been debated within the literature whether the paradigmatic integration of the two constructs is possible, and if so, whether this would be useful in terms of unpacking managerial implications for organizations (discussed in Schneider, Ehrhart, & Macey, Reference Schneider, Ehrhart and Macey2013). One such attempt at integration was the development of the cultural approach as an alternative to the structural, perceptual, and interactive perspectives commonly considered to give rise to our understanding of what constitutes an organizational climate (Moran & Volkwein, Reference Moran and Volkwein1992). Despite the possibility of integrating the two constructs, and attempts to do so, researchers continue to study organizational climate and organizational culture separately.

A review of empirical work on both organizational climate and organizational culture in the Journal of Applied Psychology found that there has been greater empirical work in the journal on organizational climate than on organizational culture (Schneider, González-Romá, Ostroff, & West, Reference Schneider, González-Romá, Ostroff and West2017). This is unsurprising given the prevalence of quantitative research within this journal, together with the more tangible nature of climate relative to culture, which arguably makes climate easier to measure and objectively capture utilizing quantitative means (Kuenzi et al., Reference Kuenzi, Mayer and Greenbaum2020). Nonetheless, it does illustrate the ongoing emphasis on climate rather than culture in empirical work in organizational settings.

Charting the Domain

Having provided an overview of organizational climate and organizational culture in the preceding sections, we briefly discuss how ethical climate has been defined in prior research. Martin and Cullen (Reference Martin and Cullen2006: 177) define ethical climate as shared perceptions between members of an organization or part of an organization as to “what constitutes right behavior” and as arising when “members believe that certain forms of ethical reasoning or behavior are expected standards or norms for decision making within the firm.” This definition revisits Victor and Cullen’s (Reference Victor, Cullen and Frederick1987: 51) construing of ethical climate as “the shared perception of what is correct behavior and how ethical situations should be handled in an organization.”

Ethical culture and climate are key facets of the organizational ethical context. Before reviewing the literature on ethical culture, it is useful to understand where the constructs differ and overlap. The two constructs share some similarities in that they refer to shared employee perceptions about the organization’s ethical context, and they assist employees in making sense of the work environment and develop because of interactions between organizational members (Kuenzi et al., Reference Kuenzi, Mayer and Greenbaum2020). They diverge in that, whereas ethical culture focuses on how the social environment is created, ethical climate focuses on the way in which employees experience the environment through their shared interpretation of organizational policies, rules, and procedures (Mayer, Reference Mayer, Schneider and Barbera2014). The key difference between the two constructs has been well articulated in the work of Kaptein (Reference Kaptein2011a), who elucidated that, whereas ethical climate refers to employees’ perceptions about what is the right thing to do in the organization, ethical culture is procedural in that it relates to whether employees believe the conditions are in place within the organization to influence ethical behavior. Newman, Round, Bhattacharya, and Roy (Reference Newman, Round, Bhattacharya and Roy2017) argue that they are separate but interrelated in that ethical culture lays the grounding conditions from which ethical climate can operate in an organization.

Measuring Ethical Culture

In this section, we examine how ethical culture has been measured in prior empirical work. In addition, we elaborate on the key methodological concerns that result from our review on how the construct has been measured. Our research shows that several different scales have been used to measure ethical culture (see Table 1). The most popular of these are the ECQ (Treviño et al., Reference Treviño, Butterfield and McCabe1998) and the Corporate Ethical Virtues Scale (CEVS) (Kaptein, Reference Kaptein2008, 2009).

Drawing on the interactionist model (Treviño, Reference Treviño1990), which examines how individual and situational variables interact to influence ethical decision-making, Treviño et al. (Reference Treviño, Butterfield and McCabe1998: 453) defined ethical culture as “formal and informal control systems (e.g., rules, reward systems, and norms) that are aimed more specifically at influencing behaviour.” Based on the previous work of Treviño (Reference Treviño1990), Treviño et al. (Reference Treviño, Butterfield and McCabe1998) developed the twenty-one-item ECQ to measure organizational ethical culture. The questionnaire comprises a unidimensional scale measuring the “overall ethical environment” to capture formal and informal policies and practices that support ethical behavior within organizations (such as ethical leadership, norms, reward systems, and codes of conduct). Abbreviated versions of the ECQ have been widely used in subsequent research, including Key’s (Reference Key1999) Ethical Culture Questionnaire–Modified (ECQ-M). While the ECQ has been extensively used, Kuenzi et al. (Reference Kuenzi, Mayer and Greenbaum2020) contend that it is not an appropriate scale to measure ethical culture but should instead be used as an instrument to measure ethical climate, albeit with limitations, which they claim to have addressed with their Ethical Organizational Climate Scale, which builds on the ECQ.

Drawing on the virtue-based theory of business ethics, the fifty-eight-item CEVS was developed later by Kaptein (Reference Kaptein2008, 2009). The CEVS adopts a multidimensional conceptualization of organizational ethical culture comprising eight dimensions (Table 2).

Table 2: Virtues Underpinning Measurement of Ethical Culture

The CEVS has been tested and validated in subsequent studies across different cultural contexts and nations, namely, Finland (e.g., Huhtala, Feldt, Hyvönen, & Mauno, Reference Huhtala, Feldt, Hyvönen and Mauno2013; Huhtala, Feldt, Lämsä, Mauno, & Kinnunen, Reference Huhtala, Feldt, Lämsä, Mauno and Kinnunen2011; Huhtala et al., Reference Huhtala, Kaptein and Feldt2016; Riivari, Lämsä, Kujala, & Heiskanen, Reference Riivari, Lämsä, Kujala and Heiskanen2012), Lithuania (e.g., Novelskaitė, Reference Novelskaitė2014; Novelskaitė & Pučėtaitė, Reference Novelskaitė and Pučetaitė2014), and South Africa (van Wyk & Badenhorst-Weiss, Reference van Wyk and Badenhorst-Weiss2019), and in diverse languages, including Spanish (Toro-Arias, Ruiz-Palomino, & Rodríguez-Córdoba, Reference Toro-Arias, Ruiz-Palomino and Rodríguez-Córdoba2021).

A shorter version of the fifty-eight-item CEVS scale developed by DeBode et al. (Reference DeBode, Armenakis, Feild and Walker2013), comprising thirty-two items, captures the same eight dimensions as the original CEVS. The shorter version of the scale, called the Short Form (CEV-SF) or CEV-32, has been validated in three independent studies in English, Finnish, and Spanish (Cabana & Kaptein, Reference Cabana and Kaptein2021; Huhtala et al., Reference Huhtala, Kaptein, Muotka and Feldt2022; Toro-Arias et al., Reference Toro-Arias, Ruiz-Palomino and Rodríguez-Córdoba2021). It is encouraging that DeBode et al. (Reference DeBode, Armenakis, Feild and Walker2013) validated a shorter version of the original CEVS. This affords the possibility for scholars to consider shortening the length of the scales for future research, which has its pros and cons and may offer some benefits in conducting research (for a detailed discussion on the relevance and benefits of shorter scales, see Hinkin, Reference Hinkin1995). We recommend that future research consider development of multiple versions of the scale, depending on a researcher’s goals. For example, it may be possible to create a valid and reliable version that has three items per dimension and another that takes the highest loading item from each dimension and creates a simpler, seven-item measure of overall ethical culture. If it is found to work, for example, to predict outcomes well, then it will be more usable in survey research. It would be particularly helpful to researchers surveying teams in organizations. If a researcher were interested in a particular dimension’s effect, the researcher could use the longer version, which can include multiple items per dimension.

In concluding our discussion of measuring ethical culture, we note that the conceptualization of ethical culture in measurement scales is based on individual employees’ perceptions of ethical culture within an organization. Both scales predominantly used to measure ethical culture so far (Kaptein, Reference Kaptein2008; Treviño et al., Reference Treviño, Butterfield and McCabe1998) have typically measured the construct at the individual level. Therefore it is difficult to determine whether individual responses reflect the ethical culture in the team or organization; that is, are these the shared perceptions of the culture in the organization? In other words, the term ethical culture analyzed in most of the scholarly works covered in this article represents the notion of “perceived ethical culture” at the individual level. To be precise, the individual-level responses should not be interpreted as reflecting shared values, norms, and beliefs, unless we do not study the aggregation of perceived ethical culture to the group or department level in an organization. This is a major flaw in most of the research on ethical culture. Only a limited number of papers have adopted aggregated measures. For example, Duh, Belak, and Milfelner (Reference Duh, Belak and Milfelner2010) considered aggregation of the “core values” of an organization as a whole rather than as individual employee perceptions. Although they did not use the term ethical culture, their treatment of organizational core values can be interpreted as an aggregated approach to measuring culture. Their study focused on family-owned vis-à-vis nonfamily businesses with an underlying premise that an organization-wide conglomeration of values is more likely in family-owned businesses because of the superimposition of family values on the organizational values in ultimately shaping the organization’s culture. However, even Duh et al. conflated ethical climate and ethical culture to a degree, as they went on to use Victor and Cullen’s (Reference Victor, Cullen and Frederick1987) ethical climate scale in conjunction with other standard instruments to determine the type and strength of organizational culture. Given the definition of ethical culture as “shared perceptions of what constitutes appropriate behavior” (Martin & Cullen, Reference Martin and Cullen2006), we suggest that future research needs to draw on aggregation of individual employee perceptions to at least a group level so that the group-level perceptions of ethical culture can be captured.

Methodological Concerns

Our systematic review raised several methodological concerns with the extant literature on ethical culture in relation to its definition and measurement. First, despite the development of validated scales to measure ethical culture, thirty-two out of eighty-nine quantitative articles used the CEVS or an abbreviated or modified version (DeBode et al., Reference DeBode, Armenakis, Feild and Walker2013; Kaptein, Reference Kaptein2008, 2009) and eighteen used the ECQ or an abbreviated or modified version (Key, Reference Key1999; Treviño et al., Reference Treviño, Butterfield and McCabe1998), while others failed to draw on established validated measures of ethical culture. Instead, these studies developed their own ad hoc scales or combined items from different scales (e.g., Ardichvili, Jondle, & Kowske, Reference Ardichvili, Jondle and Kowske2012; Park & Blenkinsopp, Reference Park and Blenkinsopp2013; Sweeney, Arnold, & Pierce, Reference Sweeney, Arnold and Pierce2010), without adequately evaluating the construct validity of the scales before applying them. In Table 1 and Supplementary Appendix B, we highlight the key scales used to measure ethical culture, along with the dimensions and related questions.

Although efforts have been made to distinguish between measures of ethical climate and measures of ethical culture (Kaptein, Reference Kaptein2011b; Treviño et al., Reference Treviño, Butterfield and McCabe1998), we have yet to determine the relative strength of the CEVS in predicting ethical outcomes in the workplace compared to the ECQ or other scales. Another methodological weakness relates to limited work examining the relative explanatory power and predictive validity of the CEVS (Kaptein, Reference Kaptein2008) and other scales, such as the ECQ (Treviño et al., Reference Treviño, Butterfield and McCabe1998), within a single study.

Our review found very few longitudinal studies that capture the influence of ethical culture on organization- or employee-level outcomes (e.g., Huhtala et al., Reference Huhtala, Kaptein and Feldt2016; Huhtala et al., Reference Huhtala, Kaptein, Muotka and Feldt2022; Kangas, Kaptein, Huhtala, Lämsä, Pihlajasaari, & Feldt, Reference Kangas, Kaptein, Huhtala, Lämsä, Pihlajasaari and Feldt2018; Kaptein, Reference Kaptein2009). As a result, it becomes difficult to determine causality between ethical culture and its antecedents and outcomes over time. Future work should draw on longitudinal panel data to determine how ethical culture changes across time in response to the dynamic nature of the organizational environment.

Finally, in concluding our discussion of methodological concerns, we raise the question of theoretical alignment and choice of methods in the study of ethical culture. Drawing on broader organizational culture and climate research, the two can be distinguished based on epistemology, point of view, and methodology (Denison, Reference Denison1996). These differences inevitably lead to a variation in research methods. We notice a predominant use of qualitative methods to study organizational culture as compared to the extensive use of quantitative methods to study organizational climate. However, the current review found a predominant use of quantitative methods to study ethical culture. One could argue, considering these findings, that not only is there greater scope for qualitative methods in the study of ethical culture (consistent with the organizational culture approach) but also the use of quantitative methods to study ethical culture is incongruous with the ontology and epistemology of the phenomenon. Similar questions have been raised in the broader organizational research domain, with the assertion that quantitative measures of culture capture espoused values or behavioral norms and “not the full richness of the construct” (Schneider et al., Reference Schneider, Ehrhart and Macey2013: 375), and there has been a suggestion that cultural measurement should shift to “reflections” and “explanations” captured through natural language (Schneider et al., Reference Schneider, Ehrhart and Macey2013: 379). Given the aforesaid, it seems appropriate that ethical culture researchers are explicit about the theoretical perspectives they adopt, including assumptions about knowledge and the nature of being. In other words, they should clarify their ontological and epistemological positions, select methods aligned with these, and be transparent about the implications of these choices in terms of research outcomes.

National Culture

Drawing on cultural values frameworks, the link between national culture and ethical culture in organizations has been explored in a small number of studies. Ardichvili, Jondle, Kowske, Cornachione, Li, and Thakadipuram (Reference Ardichvili, Jondle, Kowske, Cornachione, Li and Thakadipuram2012) found no significant differences in perceived ethical culture, as measured by their own eight-item scale, between managers and employees from BRIC (Brazil, Russia, India, and China) nations and no significant differences between managers and employees from the United States and BRIC countries. In contrast, Burnaz, Atakan, Topcu, and Singhapakdi (Reference Burnaz, Atakan, Topcu and Singhapakdi2009) found significant differences in employees’ perceptions of ethical culture, where American and Turkish respondents perceived their companies to have stronger ethical culture than Thai respondents.

Organizational Factors

Personal Characteristics

Researchers have explored the link between employees’ personal characteristics and their perceptions of an organization’s ethical culture. Karaköse and Kocabaş (Reference Karaköse and Kocabaş2009) studied the influence of demographic characteristics on teachers’ perceptions of ethical culture in the Turkish education system. They found that female employees teaching science in higher education tended to rate ethical culture as higher in their organizations, as captured by self-report measures developed for the purposes of the study. Drawing on the theory of moral development (Kohlberg, Reference Kohlberg1984; Rest, Reference Rest1979), Pierce and Sweeney (Reference Pierce and Sweeney2010) examined demographic factors of auditors’ perceptions of ethical culture in their organizations using Hunt et al.’s (Reference Hunt, Wood and Chonko1989) five-item scale. They found that female employees with postgraduate education working at larger audit firms tended to rate ethical culture as higher in their organizations. In a study of accountants, Svanberg and Öhman (Reference Svanberg and Öhman2013) found that those who experienced greater time budget pressure, defined as the pressure accountants felt to bill more for their time, were more likely to have negative perceptions of their organizations’ ethical culture. This in turn led to lower-quality audits.

Mediating Role of Ethical Culture

The mediating role of ethical culture has been examined in only six out of eighty-nine studies. Drawing on samples of Turkish teachers and US Army personnel, respectively, both Sagnak (Reference Sagnak2017) and Schaubroeck et al. (Reference Schaubroeck, Hannah, Avilio, Kozlowski, Lord, Treviño and Dimotakis2012) found that ethical culture, as measured by the ECQ, mediated the link between ethical leadership and follower outcomes, including voice behavior, ethical cognition, and ethical behavior. In their study of US Army personnel, Schaubroeck et al. (Reference Schaubroeck, Hannah, Avilio, Kozlowski, Lord, Treviño and Dimotakis2012) aggregated the self-report data captured using the ECQ to both the unit (squad) and the organizational (company) level. Their findings confirm that leaders influence followers’ cognition and behavior through ethical culture at different hierarchical levels. Similarly, Ullah, Hameed, Kayani, and Fazal (Reference Ullah, Hameed, Kayani and Fazal2022) and Wu et al. (Reference Wu, Kwan, Yim, Chiu and He2015) found that ethical culture as measured by the ECQ-M (Key, Reference Key1999) mediated the link between the CEOs’ ethical leadership and corporate social responsibility (CSR) outcomes in Pakistani and Chinese organizations, respectively. Wu et al. (Reference Wu, Kwan, Yim, Chiu and He2015) also found that the mediated relationship is accentuated by CEO founder status and firm size.

Ethical culture mediates the link between employees’ perceptions of investment in antioccupational fraud and the perceived frequency of occupational fraud, as noted in Suh et al. (Reference Suh, Shim and Button2018). In another study, based on 175 managers in thirty construction firms, Kancharla and Dadich (Reference Kancharla and Dadich2020) found that ethics training fostered an ethical culture (measured by the ECQ), as well as mediating the positive link between ethics training and positive workplace behavior. In doing so, they drew on cognitive dissonance theory (Festinger, Reference Festinger1942), which shows how individuals respond to situations in which they feel mental discomfort due to conflicting attitudes, beliefs, or behaviors, and by altering the attitudes, beliefs, or behaviors, they reduce the discomfort. In other words, ethics training leads to dissonance reduction. Drawing on data from employees in Chinese and Pakistani SMEs, Waheed and Zhang (Reference Waheed and Zhang2022) found that CSR practices fostered a strong ethical culture as captured by the ECQ and that ethical culture mediated the link between CSR practices and sustainable organizational performance.

Organizational Outcomes

Burgeoning research has looked at the link between ethical culture and organizational outcomes, including organizational innovation and performance. Across several quantitative studies, Riivari and colleagues found a strong, direct link between ethical culture as captured by the CEVS and various measures of organizational innovation in both Finnish and Lithuanian organizations (Pučėtaitė, Novelskaitė, Lämsä, & Riivari, Reference Pučėtaitė, Novelskaitė, Lämsä and Riivari2016; Riivari & Lämsä, Reference Riivari and Lämsä2014; Riivari et al., Reference Riivari, Lämsä, Kujala and Heiskanen2012). Of all the dimensions of ethical culture in the CEVS, congruency of management seemed to exert the strongest effects on organizational innovativeness (Riivari & Lämsä, Reference Riivari and Lämsä2014; Riivari et al., Reference Riivari, Lämsä, Kujala and Heiskanen2012). Qualitative work based on thirty-nine organizational interviews by Riivari and Lämsä (Reference Riivari and Lämsä2019) confirmed that the presence of organizational ethical virtues of feasibility, discussability, and supportability, along with congruency of management, which are measures of ethical culture, do support organizational innovativeness. Van der Wal and Demircioglu (Reference van der Wal and Demircioglu2020), in their study of the Australian Public Service Commission (survey data set n = 80,316), noted a strong link between ethical culture at both the organization and workgroup level and innovation in working groups.

The presence of ethical culture influences organizational performance. Eisenbeiss et al. (Reference Eisenbeiss, van Knippenberg and Farhbach2015) found that although ethical culture captured by the CEVS is positively associated with firm performance, it was only influential in fostering firm performance when there was a strong corporate ethics program in place. Waheed and Zhang (Reference Waheed and Zhang2022) noted a strong link between ethical culture as captured by the ECQ and the sustainable competitive performance of Chinese and Pakistani SMEs. Qualitative work has also examined the link between ethical culture and firm performance. Jurkiewicz (Reference Jurkiewicz2007) found that absence of an ethical culture contributed to and exacerbated administrative failure among organizations during and after Hurricane Katrina in the US state of Louisiana. In explaining the link between ethical culture and performance, researchers have drawn on theories like upper echelons theory (Hambrick & Mason, Reference Hambrick and Mason1984) and stakeholder theory (Freeman, Reference Freeman2010).

Researchers have also begun to look at how ethical culture influences organizational practices. Drawing on data from Slovenia, Šalamon, Milfelner, and Belak (Reference Šalamon, Milfelner and Belak2016) examined the link between different subdimensions of ethical culture under the CEVS and firm payment discipline, that is, the extent to which firms pay on time. Although they found a positive link between the sanctionability and feasibility dimensions of ethical culture and firm payment discipline, they found a negative link between the transparency dimension and payment discipline. Qualitative work has also established that ethical culture has a positive influence on the financial reporting practices of insurance companies (Chariri, Reference Chariri2009). In addition, Svanberg and Öhman (Reference Svanberg and Öhman2013) established that different dimensions of ethical culture as measured by the ECQ improved the quality of auditing. Shafer and Simmons (Reference Shafer and Simmons2011) examined the link between ethical culture captured by the ECQ and accountants’ use of tax minimization strategies. They found that accountants who worked in organizations with ethical cultures characterized by strong ethical norms and incentives were less likely to engage in tax minimization strategies in a high–moral intensity case. In contrast, in a low–moral intensity case, employees working in organizational ethical cultures where managers were unethical and rewarded unethical behavior were more likely to engage in tax minimization strategies. Suh and Shim (Reference Suh and Shim2020) found that ethical culture influenced the use of corporate antifraud strategies, as perceived by employees, through supporting the development of whistleblowing policies in organizations.

In recent years, researchers have found a strong connection between ethical culture and investment in organizational CSR, investors’ evaluations of CSR practices, and choice of suppliers based on social and environmental criteria (Stuart, Beddard, & Clark, Reference Stuart, Beddard and Clark2020; Ullah et al., Reference Ullah, Hameed, Kayani and Fazal2022; Wu et al., Reference Wu, Kwan, Yim, Chiu and He2015). Recent research has also established that different dimensions of an organization’s ethical culture have significant influence on how purchasing managers account for social and environmental criteria when selecting suppliers (Goebel, Reuter, Pibernik, & Sichtmann, Reference Goebel, Reuter, Pibernik and Sichtmann2012). There has been limited use of theory in explaining the correlation between ethical culture and organizational practices. A couple of studies, however, have drawn on upper echelons theory to examine how, through fostering ethical culture, ethical leadership influenced organizations’ adoption of CSR practices (Ullah et al., Reference Ullah, Hameed, Kayani and Fazal2022; Wu et al., Reference Wu, Kwan, Yim, Chiu and He2015).

Researchers have also examined the connection between ethical culture and ethical outcomes at the organizational level. Webb (Reference Webb2012) found that the promotion of some dimensions of ethical culture, as captured by the CEVS, was linked to reduced levels of malfeasance in the US prison service. Kaptein (Reference Kaptein2011b) found a link between an aggregated measure of ethical culture captured by the CEVS and employees’ aggregated perceptions of unethical behavior at the firm level. Suh et al. (Reference Suh, Shim and Button2018) found a strong association between ethical culture and employees’ perceptions around the frequency of fraudulent activity in their organization.

Employee Outcomes

Other Outcomes

Researchers have explored other outcomes of ethical culture. For example, Vitell, Rallapalli, and Singhapakdi (Reference Vitell, Rallapalli and Singhapakdi1993) found that ethical culture was not connected to the marketing-related norms of marketing practitioners in the United States. Meanwhile, Tsai and Shih (Reference Tsai and Shih2005) found a positive relationship between ethical culture and employee idealism but not relativism in Taiwan. They also found that ethical culture reduced role conflict.

Examining Ethical Culture from a Cross-Disciplinary Perspective

In the previous sections, concerns were raised with the definition and measurement of ethical culture, which underpins research decisions and may constrain the evolution of the field. In this section, we examine ethical culture from a cross-disciplinary perspective as a way of reconstructing what ethical culture is and thereby open new opportunities for empirical advancement. The evolution of a construct cannot be meaningfully examined and boxed within the watertight compartments of a specific discipline area. Rather, such evolution is best examined organically in terms of how and where it (or something very similar to it) may have struck root in a cross-disciplinary space and contributed to a thematic evolution of a construct. Otherwise, a review can run the risk of losing sight of the forest for the trees.

Ethical human behavior is a topic of interest in myriad disciplines, ranging from the organization sciences to experimental economics. Of course, one might argue that although organizational ethical culture could fit under the broader umbrella of ethical human behavior, not everything that is deemed fit for study within the domain of ethical human behavior is related to the organizational ethical culture. Nevertheless, ethical human behavior within organizations has been studied from a multitude of disciplinary perspectives. The exact construct of ethical culture has not always been expressly invoked, but the focus of the studies and the conclusions drawable from such studies do make them relatable to the broader, thematic evolution of the phenomenon of organizational ethical culture.

One particularly interesting dimension of studying ethical culture is contra-frameworks. We define a contra-framework as any systematic body of knowledge that examines something that is diametrically opposite to the construct of interest. As an analogy from physics, studying the gravitational potential of the sun as a light-emitting celestial body could be considered a contra-framework for studying dark matter (Kim & Lenoci, Reference Kim and Lenoci2022). One may, along similar lines, also draw analogical parallels with the so-called privation theories prevalent in the philosophy of religion that seek to explain evil as the absence of good (Kane, Reference Kane1980; Svendsen, Reference Svendsen2010). Just as evil is diametrically opposed to good and darkness is diametrically opposed to light, from the perspective of ethical culture as our construct of interest, any systematic study that focuses on something that may be considered diametrically opposed to ethical culture would qualify as a contra-framework. Such contra-frameworks could potentially reveal what happens (or exists) in the absence of organizational ethical culture, thus enabling us to better hypothesize what might be eliminated (or limited/mitigated) due to its presence. For example, Verdi and Weiner (Reference Verdi and Weiner1996) studied the construct of organizational misbehavior (OMB), which may be adjudged as a contra-framework to what is expected to hold for organizational ethical behavior. Beyond merely defining their OMB construct, Verdi and Weiner examined the theoretical implications of their posited conceptual framework, thereby enriching the extant theories of work motivation. Hence, although they did not explicitly refer to organizational ethical culture, their work nevertheless has a connection with the thematic evolution of ethical culture by providing a contra-framework of organizational unethical culture. Contra-frameworks for ethical culture are also implicit in some works that have applied formal economic analysis to understanding the codes of business ethics. For example, Scalet (Reference Scalet2006) argued that prisoner’s dilemmas can in fact have a positive connotation in the context of ethical culture, although in neoclassical economics, prisoner’s dilemmas carry a negative connotation insofar as they model situations in which rational individuals consistently take decisions leading to inefficient outcomes. Although ethical organizational culture is expected to embody codes of ethics that eliminate misalignments between incentives and outcomes, Scalet’s contra-framework suggests that some of those misalignments in fact could help to create opportunities for practicing cooperative norms that ultimately benefit the organization.

Furthermore, organizational ethical culture as a subset of organizational culture is not only about ethical behavior and actions in relation to incentives and outcomes; it is also about ethical behavior in workplace relations, for example, relating to gender inclusivity. To best understand the thematic evolution of the construct, therefore, one ought to keep in sight those cross-disciplinary areas in which ethical culture (or a closely relatable construct) has been and is being studied beyond simply task-focused incentives and outcomes. In previous research, Anderson, Baur, Griffith, and Buckley (Reference Anderson, Baur, Griffith and Buckley2017) highlighted the importance of recognizing the increasing gap between current and previous generations of employees in organizations, that is, the gap between millennials and their coworkers from previous generations. This gap impacts and arguably reshapes ethical culture in terms of what can or can no longer be perceived as “ethical employee behavior” within an organizational context. Their study explored the need to revisualize organizational theories and, particularly, organizational leadership theories, taking into consideration the intergenerational gap and its impact on the evolution of organizational culture. Recently, Noronha, Bisht, and D’Cruz (Reference Noronha, Bisht and D’Cruz2022) studied employees in Indian organizations and observed that employees consider organizations possessing an ethical culture only if the intraorganizational environment is supportive and caring and deemed to be progressively evolving with the times with regard to inclusivity of diverse sexual orientations. Therefore we find an implied case here to carefully consider the similar impact of a widening intergenerational gap on the thematic evolution of organizational ethical culture in various aspects. This is likely to reshape the construct itself in the process, to dynamically fit shifting paradigmatic boundaries.

Ethical Culture in the Age of Machine Intelligence

Neubert, Carlson, Kacmar, Roberts, and Chonko (Reference Neubert, Carlson, Kacmar, Roberts and Chonko2009) posited that the extent to which an organizational leader can exert a virtuous influence on the organizational perceptions of ethical climate and culture can have a positive impact on organizational members’ job satisfaction and commitment levels. Drawing on moral identity theory, Wang and Hackett (Reference Wang and Hackett2020) likewise argued that if organizational leaders are enabled to find their appropriate trajectories of virtuous leadership, then their followers would automatically gravitate toward ethical behavior without necessarily having to rely on a suite of artifacts (such as ethical codes of conduct). While organizations are arguably witnessing an increasing frequency of team-generated organizational leadership decisions (Pearce, Conger, & Locke, Reference Pearce, Conger and Locke2008), the virtuous influence of an individual CEO who consistently exhibits moral behaviors on the efficacy of the top management team’s decision-making is also evidenced (Zhang, Li, Ullrich, & van Dick, Reference Zhang, Li, Ullrich and van Dick2015).

Regardless of whether ethical culture is team generated via equitably weighted inputs by the members of the top management team or individually demonstrated by the CEO, organizational leadership decisions taken at the upper echelons are increasingly being influenced by intelligent decision support systems. This influence is predicted to steadily increase, even for those largely unstructured, strategic decisions that have traditionally been seen as the domain of individual leadership acumen and vision rather than output of some programmable software (Courtney, Reference Courtney2001; Gigerenzer & Gaissmaier, Reference Gigerenzer and Gaissmaier2011; Parry, Cohen, and Bhattacharya (Reference Parry, Cohen and Bhattacharya2016) have interestingly contended that given an ever-widening span of business applications of machine intelligence, it seems but a matter of time until an artificial intelligence (AI) system will become a key contributor to organizational leadership decisions.

Indeed, as organizations evolve into larger and more complex and convoluted forms, it can be reasonably hypothesized that organizational leader(s) will need to acquire and process ambiguous, incomplete, and inconsistent information with increasing regularity in envisioning strategic objectives. Time is a crucial factor when it comes to unstructured, strategic decisions that need to be taken in the upper echelons of an organization, often resulting in a trade-off between efficiency and efficacy in organizational leadership decision-making. As AI systems for executive decision support become progressively capable, the potential time savings by embedding an AI entity within the top management team could become increasingly significant, particularly for iterative team decision-making approaches like the Delphi method. Traditional Delphi methods are known to be notoriously slow in yielding actionable outcomes, especially in situations demanding rapid response (Xie, Liu, Chen, Wang, & Chaudhry, Reference Xie, Liu, Chen, Wang and Chaudhry2012). It is against this backdrop that the role of AI as a key contributor to organizational leadership decisions in the upper echelons starts to gain relevance. AI algorithms are increasingly becoming more capable in terms of their information processing capabilities, particularly when dealing with incomplete and inconsistent information. Pathbreaking advances in the underlying mathematical and computational fields, for example, neutrosophic logic, which is essentially a multinomial extension of binary fuzzy logic, are making it probable to conceive AI with better ability than humans in managing such kinds of information in the foreseeable future (Abdel-Basset, Mohamed, & Sangaiah, Reference Abdel-Basset, Mohamed and Sangaiah2018). An AI system can rapidly parse largely unstructured information, thus allowing a speedy convergence of iterative team decision-making methods like Delphi, saving precious time in the process compared to what top management teams without an embedded AI system can achieve.

It may of course be argued that the time has not yet come, in terms of the cognitive capabilities thus far acquired by AI, for it to be considered a full-fledged member of a top management team having equivalent authority to a human member of that team. This is particularly so given that AI systems are notoriously poor in dealing with ethical constraints (Davenport & Harris, Reference Davenport and Harris2005; McShane, Nirenburg, & Jarrell, Reference McShane, Nirenburg and Jarrell2013). Parry et al. (Reference Parry, Cohen and Bhattacharya2016) critically discuss certain examples of where AI systems may still be falling short of the mark (e.g., ethical awareness of driverless cars in accident situations). The authors posit a theoretical framework to effectively address pertinent ethical concerns in the context of an organizational leadership decision-making process in which the top management team has an embedded AI-based system as a member. The central foundation of their posited framework is a “logged veto” that can help mitigate the potential negative fallout of deindividualization that can arise out of embedding an AI system within a top management team. There is indeed a growing need for scholarly conversation addressing the potential implications of AI involved in organizational leadership decision-making in general, and its implications for organizational ethical culture in particular, that is informed by a realistic appreciation of the current and foreseeable state of the art of AI-based systems (Tasioulas, Reference Tasioulas2019).

Drawing on moral identity theory, Wang and Hackett (Reference Wang and Hackett2020) have boldly asserted that fostering moral character building for organizational leaders enables them to find their right trajectories of virtuous leadership. This is what would ultimately exhort their followers (organizational members) toward ethical behavior, instead of relying on a suite of artifacts (such as ethical codes of conduct). This in turn would have strong implications for any AI-based leadership decision-making process. AI-based systems, as contrasted with programmed software, tend to be deep learning systems that learn from and then attempt to emulate the desired human behavior. However, such learning (especially if it is supervised learning) would need to be guided by some artifacts that serve as potential anchor points for the system to modulate its learning. Bereft of such anchor points, a system would be prone to “overlearning” and therefore unable to generalize beyond a very restrictive setting. For example, if the system is learning about ethical behavior only by observing a specific virtuous leader in action, then it will emulate that specific individual’s behavior rather than learning about how to act ethically in general.

While an AI-based system embedded within an organizational leadership team can potentially make the leadership decision-making processes less prone to the subjective biases of individuals, the critical issue is about the potential implications for perceived organizational ethical culture. This is of particular concern given that AI-based critical decision processes are notoriously poor in dealing with ethical constraints (Davenport & Harris, Reference Davenport and Harris2005; McShane et al., Reference McShane, Nirenburg and Jarrell2013). For example, to what extent can the organizational leadership team with an embedded AI-based system as a member exert a virtuous influence on the organizational perceptions of ethical culture if, indeed, as Wang and Hackett (Reference Wang and Hackett2020) have argued, it is each individual leader’s moral character that ultimately determines the ethical behavior of the organizational followers (i.e., the employees)? As an immediate, ready-to-implement research agenda, it will be interesting to investigate the existence of a statistically significant moderating effect of an embedded AI-based system within the organizational leadership team on the hypothesized relationship between virtuous leadership and employee perceptions of organizational ethical culture.

Considering Ethical Culture in New Organizational Forms

We believe that there is significant opportunity for researchers to extend the existing knowledge base by examining ethical cultures within emerging organizational forms. A pertinent observation that “the design of organizations needs to change radically to meet the problems of a more complex, turbulent world” (Mitroff, Mason, & Pearson, Reference Mitroff, Mason and Pearson1994: 20) continues to be echoed by researchers (Rimita, Hoon, & Levasseur, Reference Rimita, Hoon and Levasseur2019) and provides continuing impetus to revisit ethical culture in relation to emerging organizational forms. In particular, we discuss the emergence of large, dominant digital platforms and the reliance on a contingent, distributed workforce, both of which provide opportunities to extend the study of ethical culture.

A common theme in the study of emerging organizational forms is the pervasive nature of technology, so much so that the digital platform (technologies that provide access to an online marketplace) has been described as the core organizational form of the emerging informational economy (Cohen, Reference Cohen2017). In addition, developed economies are seeing the emergence of giant businesses that are organizationally complex; technologically advanced; and diverse in terms of their products, services, and geographies (Whittington & Yakis-Douglas, Reference Whittington and Yakis-Douglas2020). These businesses have market power similar in scale to that seen in the early twentieth century (Lamoreaux, Reference Lamoreaux2019). Bringing ethical behavior into sharp focus owing to concerns about “dystopian domination of the global economy by a digital platform oligopoly with little public accountability” (Vergne, Reference Vergne2020: 3), examples of failure by these large, powerful organizations (e.g., Google, Baidu, Facebook) to exercise their vast powers with due responsibility, such as market manipulation, facilitating medical malpractice, and influencing elections, continue to emerge (Whittington & Yakis-Douglas, Reference Whittington and Yakis-Douglas2020). Our research has shown that there is a lack of research on ethical culture within the context of these technologically driven, new organizational forms. Given the complexity of these organizations, measuring and aggregating ethical culture may be challenging, and as we discuss next, the changing structure of the workforce adds to this complexity.

Ethical culture is a system of shared values, beliefs, and assumptions, dependent on socialization between organizational members (Ehrhart, Schneider, & Macey, Reference Ehrhart, Schneider and Macey2013). However, the organization of work has changed over the last few years, with many large organizations moving away from the concept of a centralized workforce. Increasingly, organizations are relying on nonstandard forms of employment, referred to as a “contingent workforce,” as a means of accessing diverse skills and ideas (Sulbout, Pichault, Jemine, & Naedenoen, Reference Sulbout, Pichault, Jemine and Naedenoen2022). Although the ethics of the process of a casual or “gig” workforce has been the subject of much debate among researchers (Schlagwein, Schoder, & Spindeldreher, Reference Schlagwein, Schoder and Spindeldreher2019), the impact of a distributed, loosely connected workforce on an organization’s ethical culture has not been examined. Distributed-decentralized structures, such as digital platforms with distributed decision-making and decentralized access to data, as well as organizations with a high reliance on a contingent workforce are culturally fragmented, making normative control through employee socialization challenging (Whittington & Yakis-Douglas, Reference Whittington and Yakis-Douglas2020).

Considering these challenges, future research might study the effectiveness of normative controls throughout highly distributed organizations, the extent to which ethical culture varies across very decentralized structures, and the ways in which democratizing data while enabling dispersed decision-making impacts ethical behaviors within an organization. For example, future research could build on emergent theorizing about the impact of deliberative governance (Scherer & Palazzo, Reference Scherer and Palazzo2011; Scherer & Voegtlin, Reference Scherer and Voegtlin2020), that is, greater participation and reflexivity in decision-making, and “open strategy” (Hautz, Seidl, & Whittington, Reference Hautz, Seidl and Whittington2017; Seidl, von Krogh, & Whittington, Reference Seidl, von Krogh and Whittington2019), that is, stakeholder inclusion and transparency, on control systems within powerful, large, contemporary organizations (Whittington & Yakis-Douglas, Reference Whittington and Yakis-Douglas2020). On the basis of these theoretical constructs, it is argued that emergent, global professional networks, together with openness (both managed and unmanaged), will drive norms that are likely to influence corporate control (Whittington & Yakis-Douglas, Reference Whittington and Yakis-Douglas2020), and this by implication will influence ethical culture within these new organizational forms.

Leadership and Ethical Culture

Although the previous sections have introduced new ways of considering ethical culture in relation to emerging and future organizational forms, we would be remiss in our review if we were to neglect to mention the key gaps identified in the existing studies of ethical culture, in particular, the relationship between different leadership styles and ethical culture. Our review highlighted a growing body of research linking ethical leadership to ethical culture. This finding is unsurprising and in line with social learning theory (Bandura, Reference Bandura1971). We might expect that leaders’ role-modeling of appropriate behaviors will lead followers to emulate such behavior. In other words, if a leader acts in an ethical manner, it may be expected that an ethical organizational culture will develop as followers build a collective understanding of what composes appropriate behavior. In addition, as existing research has shown, an ethical culture can mediate the relationship between leadership and the behavior of followers.

Future research in this area can study the influence of different forms of leadership on ethical culture. For example, negative leadership approaches, such as authoritarianism, would be expected to induce unethical behavior in the organizational context (Zheng, Graham, Farh, & Huang, Reference Zheng, Graham, Farh and Huang2021). Alternatively, researchers might examine the relationship between servant leadership (Greenleaf, Reference Greenleaf1977) and the ethical organizational culture. Servant leadership adopts a leadership approach that focuses on supporting the development of followers and serving the community (Greenleaf, Reference Greenleaf1977). Servant leadership encompasses a values-based approach to leading, and it could be contended that this leadership approach is more likely to result in an ethical organizational culture as leaders and followers act in accordance with the organization’s values. However, recent studies have demonstrated that the practice of servant leadership is informed by power (Collinson, Reference Collinson, Bryman, Collinson, Grint, Jackson and Uhl-Bien2011; Liu, Reference Liu2019) and underpinned by persuasive tactics (van Dierendonck, Reference van Dierendonck2011), both of which have potential negative implications for ethical culture. Future research may also examine the dichotomy between the assumed behavioral control incorporated into the maintenance of an ethical organizational culture and the degree of persuasion and employee agency that is the basis of servant leadership.

Ethical Culture at Different Levels of Analysis

The validity of unidimensional measures (Treviño et al., Reference Treviño, Butterfield and McCabe1998) and the CEVS (Kaptein, Reference Kaptein2008, 2009) purported to capture ethical culture has been confirmed at the individual (perceptual) and organizational levels of analysis. However, very few studies have examined whether ethical culture exists at other levels of analysis, as has been done in case of ethical climate research. For example, Weber (Reference Weber1995) found that ethical climates exist within different departments of a single organization. Future research may similarly explore whether multiple ethical cultures coexist in a single organization. In addition, research into unethical decision-making (Kish-Gephart et al., Reference Kish-Gephart, Harrison and Treviño2010) has concluded that organizations create both good and bad social environments (“barrels”) that can influence the (un)ethical choices of individuals employees. Researchers can investigate the extent to which ethical culture is ubiquitous in a single organization and what might lead to variation in ethical cultures between different departments within a single organization. For example, researchers may examine whether ethical culture differs according to the business function, location of the department, and leadership of the department.

Opportunities for Theoretical Extension

We observed from our review of the literature that a considerable proportion of studies failed to draw on established theories to explain how ethical culture develops and influences numerous outcomes. In Figure 1 and in the review sections, we discuss some of the key theories that previous work has used. We endorse the continued use of established theories to examine how ethical cultures develop and influence outcomes at the organizational and employee levels. On the basis of our review, we offer some modest extensions to the existing research based on existing theory. For example, drawing on social learning theory (Bandura, Reference Bandura1971), the closely related social cognitive theory, and upper echelons theory (Hambrick & Mason, Reference Hambrick and Mason1984) would allow researchers to examine how organizational factors like leadership exert their influence on employee behavior through fostering an ethical culture. Similarly, in examining how personal factors shape individuals’ perspectives of an organization’s ethical culture, researchers might continue drawing on perspectives like the theory of moral development (Kohlberg, Reference Kohlberg1984; Rest, Reference Rest1979). In addition, researchers should continue to draw on theoretical perspectives like the theory of planned behavior (Ajzen, Reference Ajzen1991), person–organization fit theory, and cognitive dissonance theory to examine the link between ethical culture and followers’ (un)ethical intentions, (un)ethical behaviors, and work attitudes. Finally, researchers may draw on integrated resource theories like the conservation of resources theory (Hobfoll, Reference Hobfoll1989) or the job demands–resources theory (Bakker et al., Reference Bakker, Demerouti and Sanz-Vergel2014) to examine how ethical cultures influence work motivation, engagement, and well-being. We do not advocate for the use of a single theory that purports to explain all relationships between ethical culture and its antecedents/outcomes. Instead, we call on researchers to draw on theories (whether they be well established or emerging) that answer their specific research questions, per the suggested examples provided. In the following paragraphs, we also discuss additional theoretical perspectives that may be used to study the phenomenon of ethical culture.

Our review of research on ethical culture indicates that prior research has been conducted at the employee (micro) and organizational (macro) levels. As such, we call on researchers to draw on theoretical models that incorporate a mega-level perspective (Kaufman, Reference Kaufman2011). In particular, we encourage researchers to undertake cross-cultural studies (e.g., Cleveland, Erdoğan, Arıkan, & Poyraz, Reference Cleveland, Erdoğan, Arıkan and Poyraz2011; Ng, Lee, & Soutar, Reference Ng, Lee and Soutar2007) that draw on cultural values frameworks. For example, researchers might consider drawing on the national cultural dimensions framework developed by Hofstede (Reference Hofstede1980, Reference Hofstede1991) (which includes five dimensions of culture that occur across countries to varying degrees) and Schwartz’s (Reference Schwartz and Zanna1992, Reference Schwartz1999) values survey (incorporating values that can be analyzed at both individual and cultural levels). The use of such frameworks would facilitate exploring the extent to which ethical culture within organizations is sensitive to national cultural dimensions. This would be particularly useful for multinational organizations operating across borders.

With a similarly holistic, external, mega focus, Kaufman (Reference Kaufman2011) developed the organizational elements model, which describes and makes explicit the value chain of an organization. Underpinning this model is the assumption that the value creation potential of an organization should extend beyond both the individual (micro/products) and the organizational (macro/outputs) levels to encompass the societal level (mega/outcomes). Research into ethical culture with a focus on the broader value chain could ask questions about the extent to which ethical cultures within organizations connected within a value chain have a contagion effect. For example, if one organization in the value chain has an ethical culture, is this likely to improve the ethical culture in other organizations within the value chain? Conversely, will the lack of an ethical culture within one organization in the value chain influence the other organizations within the value chain against developing an ethical culture?

In addition, we call on future research to dauntlessly explore the application of emerging theories in the study of ethical culture. In 2020, a symposium at the Academy of Management Proceedings explored the role of distributed trust in blockchains. The authors (Lu et al., Reference Lu, Phung, Seidel, Albareda, Hsieh, Murray, Santana and Vergne2020) proposed a decentralized organization theory (which assumes the presence of an ethical culture that leads to ethical behavior and sustains trust) to understand the phenomenon of trust in blockchains, without which a blockchain cannot effectively function.

Although our review focused specifically on ethical culture, it could be asserted that researchers should consider other aspects of organizational culture with a view to building a multifaceted understanding of how ethical culture overlaps, intersects with, and/or influences other forms of organizational culture. Our review of ethical culture research found a dearth of research that considers ethical culture within the context of other cultures prevailing within the organization. Hoffman and Ford (Reference Hoffman and Ford2010) have proposed a humanistic-existential theory of organizations by which the organization is compared to a living being with emotions. The theoretical concept is based on four premises, namely, organizational character; organizational intra- and interconnectedness; organizational motivation and emotion; and organizational meaning, development, and voice. These four interact to create an organizational identity and voice. It may be interesting to consider how all this shapes the ethical culture of the organization or how we can use this knowledge as a catalyst for potential ethical culture change. Recently, Park, Park, and Barry (Reference Park, Park and Barry2021) extensively reviewed the role of incentives (as an organizational system) and their effect on unethical behavior or unethicality in organizations. The authors propose that future research study the role of incentives in organizations and how these contribute to unethicality or unethical behavior. The effect of organizational incentives on an individual’s perceptions, behavior, and decisions is likely to shape the culture (unethical) within the organization. To elaborate, incentives encourage certain behavior, thereby making that behavior more prevalent and contributing to the perception of the “right” way of acting. Incentives also make transparent what behaviors organizational leadership endorses, again contributing to the perception of the “right” way of acting. Thus incentives are likely to contribute to the perceived ethical behavior (i.e., the right way of acting) within an organization.

To advance a multifaceted construct of ethical culture, we solicit research that builds on and integrates key perspectives that organizational culture researchers have utilized. For example, based on Martin’s (Reference Martin1992) work, when developing research questions, researchers may consider conceptualizing ethical culture to include not only questions of integration (there is one culture within an organization) and differentiation (there are multiple subcultures within an organization) but also questions of fragmentation (which questions whether organizational culture actually exists).

To elaborate further on exploring ethical culture within the multiplicity of organizational cultures, we believe that it might be useful for researchers to draw on the competing values framework (CVF) (Quinn & Cameron, Reference Quinn and Cameron1983; Quinn & Rohrbaugh, Reference Quinn and Rohrbaugh1983), a cultural model that connects strategic, political, and institutional aspects of organizational life and enables comparison across different organizational cultures. Underpinning this model is the idea that, within an organization, multiple goals and objectives exist that can lead to competing values among various stakeholders. The CVF provides two key dimensions to further analyze organizational culture, namely, a preference for structural control/flexibility and possessing an internal/external focus. By intersecting the two key dimensions, CVF produces four distinct organizational culture types: a development culture, a group culture, a rational culture, and a hierarchical culture. By overlaying the CVF on studies of ethical culture, researchers may ask questions such as what dominant cultures are most aligned with an ethical culture and which are least aligned with an ethical culture, thereby providing deeper insight into how ethical culture is connected to other organizational cultures. We also recommend that future research consider using emerging and hitherto untried organization theories and operationalize the new concepts in their empirical studies of ethical culture.