The Socio-Cultural
Embeddedness of
Individuals’ Ethical
Reasoning in Organizations
(Cross-cultural Ethics)
ABSTRACT. While models of business ethics
increasingly recognize that ethical behavior varies
cross-culturally, scant attention has been given to
understanding how culture affects the ethical rea-
soning process that predicates individuals’ ethical
actions. To address this gap, this paper illustrates how
culture may affect the various components of indi-
viduals’ ethical reasoning by integrating findings from
the cross-cultural management literature with cogni-
tive-developmental perspective. Implications for future
research and transnational organizations are discussed.
KEY WORDS: cognitive-developmental, cross-
culture, decision-making, ethical reasoning, ethics
In an increasingly global business environment,
one of the central challenges facing firms is how
to balance the desire for standardized global
policies, with appropriate consideration of the
specific norms of various cultural contexts
(Bartlett and Ghoshal, 1998; Enderle, 1997).
Different cultural backgrounds lead to different
ways of perceiving the world and cultural
Dr. Linda Thorne is an Associate Professor at the Schulich
School of Business, York University. She is the author
of 13 publications accepted in referred journals including
Contemporary Accounting Research, Behavioral
Research in Accounting, Journal of Business
Ethics, and Research on Accounting Ethics.
Dr. Susan Bartholomew Saunders is an Assistant Professor
in the Faculty of Business, University of Alberta. Her
thesis examined cross-cultural factors that influence the
biotechnology industry globally.
Journal of Business Ethics 35: 1–14, 2002.
© 2002 Kluwer Academic Publishers. Printed in the Netherlands.
Linda Thorne
Susan Bartholomew Saunders
differences affect individuals’ ethical reasoning
(MacDonald, 2000). Research shows that indi-
viduals from diverse cultures differ in their
sensitivity to ethical situations (Cohen, Pant and
Sharp, 1992), perceptions (Dubinsky, Jolson,
Kotabe and Lim, 1991; Jackson and Artola,
1997), ethical values, and ethical behaviors
(Becker and Fritzche, 1987; Izraeli, 1998;
Lysonski and Gaidis, 1991). However, scant
attention has been given to understanding how
culture affects the ethical reasoning process that
predicates ethical behavior.
To address this gap, this paper illustrates how
culture may affect the various components of
individuals’ ethical reasoning process. The focus
of this paper is on the differential effect of
culture, as defined as the difference in the value
structure of individuals belonging to a particular
society, on individuals’ ethical reasoning process.
This paper recognizes the importance of envi-
ronmental and contextual factors on individuals’
ethical reasoning (cf., Ford and Richardson,
1994; Jones, 1991; Trevino, 1985); however, it
is argued that given an organizational environ-
ment, individuals’ ethical reasoning may vary
depending upon cultural background. This
understanding of how individuals’ ethical
reasoning may vary according to cultural back-
ground is important if transnational corporations
wish to inculcate ethical core values throughout
their organization (Desai and Rittenburg, 1997;
Robin and Reidenback, 1987).
The concept of culture may generally be
defined as the shared beliefs and symbols of a
2 Linda Thorne and Susan Bartholomew Saunders
group of individuals (McDonald, 2000). The
concept of culture is often distinct from that of
the concept of nation as several cultures may exist
within one nation (e.g., in Canada there is a
French-speaking and an English-speaking sub-
culture) and a culture may cross national bound-
aries (e.g., the gypsies of Eastern Europe) (Bhagat
and McQuaid, 1982). However, Adler (1997,
p. 40) observes that “national boundaries are
implicitly accepted as operational definitions of
culturally distinct units” in cross-cultural man-
agement research. To attempt to address the
potential limitation associated with the use of
nation as a surrogate for culture, we specifically
consider how the various components of the
ethical reasoning process vary according to the
structural elements of culture as defined by
Hofstede (1991) and Hampden-Turner and
Trompenaars (1993). Nonetheless, to illustrate
how culture may affect particular components of
individuals’ ethical reasoning process, we draw
upon empirical research that may rely upon oper-
ational definitions of nation as a distinct cultural
entity (e.g., Lee and Sirgy, 1999; Lu, Rose and
Blodgett, 1999; Murphy, 1999; Woolliams and
Trompenaars, 1998).
This paper explicitly relates the findings
from the cross-cultural management literature
(Hofstede, 1980, 1991; Hampden-Turner and
Trompenaars, 1993) with an applied cognitive
developmental perspective to ethical reasoning
(Rest, 1979, 1994). Accordingly, this paper is
organized as follows. First, we briefly introduce
Rest’s (1994) four component model of the
ethical reasoning process. Next, we investigate
the different structural dimensions of culture as
identified by Hofstede (1991) and his colleagues
and Hampden-Turner and Trompenaars (1993)
to develop an integrated understanding of the
dimensions of culture as described by these
research teams. The third section of the paper
discusses how culture may influence the four
different components of the ethical reasoning
process. In the final section, implications for the
policies and practices of transnational corpora-
tions and for future research are considered.
Rest’s model of moral action
This paper uses Rest’s Model of Moral Action
(1979, 1994) to describe the four components
of individuals’ ethical reasoning process. Rest’s
Model of Moral Action is based upon a cogni-
tive-developmental perspective, which defines
morality as an individual’s cognitive conception
of what is “good or right”. According to cogni-
tive-developmental theory, an individual’s cog-
nitive conception of morality progresses through
a series of developmental levels in reaching
maturity.
The cognitive-developmental approach has
been successfully used in applied research to
provide insight into factors that influence indi-
viduals’ ethical actions in the workplace (e.g.,
Ford and Richardson, 1994; Ferrell and Gresham,
1985; Jones, 1991; Robertson and Ross, 1995;
Trevino, 1986). Although some have criticized
the cognitive-developmental perspective as being
inapplicable across gender and culture (e.g.,
Gilligan, 1982; Simpson, 1974), this criticism has
not been empirically substantiated (Rest, 1983;
Rest et al., 1998; Nisan and Kohlberg, 1982;
Snarey, 1985). Rest et al. (1986) and Snarey
(1985) conclude the empirical evidence is over-
whelming is support of the existence of a general
developmental trend in ethical cognitive capa-
bility across cultures. Rest’s Model of Moral
Action describes four components of the ethical
reasoning process, each involving a psychological
process and outcome, which lead to an indi-
vidual’s ethical action. These four components
are summarized in Table I.
Ethical sensitivity initiates the ethical reasoning
process through the identification of an ethical
dilemma. Ethical sensitivity reflects an awareness
that the resolution of a particular dilemma may
affect the welfare of others (Rest, 1994). Once
an ethical dilemma has been identified, individ-
uals enter a process of prescriptive reasoning in
which they evaluate the ideal outcomes that
ought to occur in a given situation (Kohlberg,
1969, 1976; Rest, 1979). The outcome of an
individual’s prescriptive reasoning process is a
prescriptive judgment of what ought to be done to
resolve an ethical dilemma (Rawls, 1971). Next,
an individual deliberates on the formulation of
 The Socio-Cultural Embeddedness of Individuals’ Ethical Reasoning in Organizations 3

TABLE I
Rest’s (1994) model of the ethical decision-making process

Psychological process Outcome

1. Ethical Sensitivity Identification of an ethical dilemma

2. Prescriptive Reasoning Prescriptive judgment of the ideal solution to the ethical dilemma
3. Deliberative Reasoning Intention to act.
4. Ethical Character Ethical action or behavior.

his or her intention to act on an ethical dilemma.
Deliberative reasoning involves a value assessment
of the “ethical” choice versus other decision
alternatives. Finally, an individual’s ethical action is
a function of one’s deliberative choice and
personal characteristics, such as ego strength and
locus of control (Rest, 1994; Trevino, 1986). For
example, a weak-willed person may choose to act
in a given manner, but is unable to follow
through in the decision choice due to lack of
ethical character.
Rest’s (1994) model and prior research in
ethical decision-making ( Jaccard and Wan, 1986;
Macdonald, 2000) suggest that the ethical
reasoning process is universal across cultures.
However, it does not necessarily follow that the
components of individuals’ ethical reasoning
process are culture-free. Macdonald (2000) argues
that the circumstance that activate and affect the
ethical reasoning process may differ across
cultures. Accordingly, the objective of this paper
is to demonstrate that like other environmental
and contextual factors (cf., Ford and Richardson,
1994; Jones, 1991; Trevino, 1985), culture may
influence every component of individuals’ ethical
reasoning. In so doing, this paper explores the
influence of culture on all four components of
individuals’ ethical reasoning as described by
Rest’s Model (1994) to expand our knowledge
of the pervasive influence of culture on individ-
uals’ ethical reasoning.
Integrated dimensions of culture
Previous ethics research has generally relied upon
Hofstede’s (1980, 1991) work to capture the
various structural dimensions of culture that may
influence individuals’ ethical reasoning (i.e. Desai
and Rittenburg, 1997; Ferrell and Gresham,
1985; Hunt and Vitell, 1992; Vitell et al., 1993).
Nevertheless, how particular components of
individuals’ ethical reasoning process are influ-
enced by culture has been explicitly considered
only by Vitell et al. (1993). Vitell et al. (1993)
describe how culture differentially affects indi-
viduals’ formation of teleological and deonto-
logical norms; hence, individuals’ prescriptive
reasoning. Vitell et al.’s model, however, does not
specify the effect of cultural variation on other
key components of individuals’ ethical reasoning
nor does it go beyond the dimensions of culture
as identified by Hofstede (1980) and his col-
leagues. This paper continues the work initiated
by Vitell et al. by using an integrated framework
of cultural dimensions to consider the influence
of culture on all four components of the ethical
reasoning process. The framework is summarized
in Table II.
Although the most influential of the work
identifying cross-cultural dimensions are those
of Hofstede (1980, 1991) and Hofstede and
Bond (1988), other more recent and compre-
hensive work is that of Hampden-Turner and
Trompenaars (1993). This study uses two dif-
ferent models of culture clustering developed
by comparative management research teams
(Hofstede, 1980, 1991; Hampden-Turner and
Trompenaars, 1993) to develop an integrated
framework of cross-cultural dimensions. Both
models provide a systematic, empirically founded
basis on which some central differences in culture
may be defined. Accordingly, we briefly compare
and contrast the cultural dimensions as presented
by Hofstede (1981) and Hampden-Turner and
Trompenaars (1993) in the development of an
4 Linda Thorne and Susan Bartholomew Saunders
Integrated framework of the dimensions of national culture
Dimension, source
Individualism/collectivism,
Hofstede (1980);
Hampden-Turner and
Trompenaars (1993).
Power distance,
Hofstede (1980);
Equality/hierarchy,
Hampden-Turner and
Trompenaars (1993).
Uncertainty avoidance,
Hofstede (1980).
Masculinity/femininity,
Hofstede (1980).
Universalism/particularism,
Hampden-Turner and
Trompenaars (1993).
Analysis/integration,
Hampden-Turner
and Trompenaars (1993).
Achievement/ascription,
Hampden-Turner and
Trompenaars (1993).
Orientation toward
the environment,
Hampden-Turner and
Trompenaars (1993).
Confucian dynamism,
Hofstede (1980);
Orientation towards time,
Hampden-Turner and
Trompenaars (1993).
TABLE II
Definition
The degree of integration
between members of society
and the relative value of
individual over collective
needs.
The degree to which an
unequal distribution of
power is accepted in society.
The degree to which a
society’s members tolerate
ambiguity or uncertainty.
The relative emphasis in
society on achievement and
accomplishment vs. overall
quality of life.
The relative emphasis in
society on rules of wide
generality vs. consideration
of special exceptions.
The relative emphasis of
society’s members to consider
organizations or event in
terms of separable parts vs.
consideration of the whole.
The relative emphasis in
society on achieved status vs.
ascribed status (e.g. by role,
age, class etc.).
The relative emphasis of
society’s members on sources
of motivation and values
stemming internally from
the individual versus the
external environment.
The relative emphasis in
society on others’ perceptions
and viewing events along
a time continuum (i.e.,
short-term vs. long-term).
Illustrative example
Individualists tend to believe that personal
interests are more important than group
interests are. In contrast, collectivists value
group interests, reciprocation of favors, a
sense of belonging and respect for tradition.
Individuals with high power distance perceive
that superiors are entitled to special privileges.
In contrast, individuals with low power
distance are more likely to prefer democratic
participation.
Individuals with high uncertainty avoidance
feel a need for written rules and procedures
and are intolerant of deviations from these rules.
In contrast, individuals with low uncertainty
avoidance are less concerned with codified
rules.
Masculine individuals are interested in material
success whereas feminine individuals are more
concerned with human relationships.
Universal individuals would tend to apply “the
golden rule” to all situations/others whereas
particularistic individuals recognize obligations
to special relationships and particular
circumstances.
High-integrated individuals tend to consider
factors and implications beyond a specific
domain, whereas high analysis individuals
tend to focus on a specific domain or realm.
In an achievement culture, your status is based
upon what you have accomplished. In contrast,
in an ascription culture, your status is a function
of your position in society and at birth.
When the source of motivation/values are the
external environment, individuals strive to
remain in harmony with their environment.
In contrast, when the source of motivation/
values are “internal,” individuals attempt to
control their environment.
High Confucian dynamism individuals
are more concerned with social norms,
“saving face” and time along a continuum
including the past, present and future
(Schwartz, 1992).
 The Socio-Cultural Embeddedness of Individuals’ Ethical Reasoning in Organizations
integrated framework that describes the dimen-
sions by which individuals’ value structure may
vary cross-culturally.
Hofstede (1981) and Hofstede and Bond
(1988) identify and describe five dimensions of
culture: individualism/collectivism; power distance;
uncertainty avoidance; masculinity/femininity and,
Confucian dynamism. Individualism/collectivism
describes the degree of integration between
members of society and the relative emphasis on
individual needs over the needs of the commu-
nity. Power distance describes the degree to which
an unequal distribution of power is accepted in
society. Uncertainty avoidance characterizes the
degree to which a society’s members tolerate
ambiguity and uncertainty. Masculinity/femininity
is the relative emphasis a society places on
achievement versus overall quality of life. Finally,
Confucian dynamism reflects the degree to which
a society takes a long-term versus a short-term
orientation in life.
Hampden-Turner and Trompenaars (1993)
identify and describe seven dimensions of culture:
individualism/collectivism; equality/hierarchy; orien-
tation toward time; analysis/integration; achieve-
ment/ascription; universalism/particularism; and,
orientation toward the environment. The first three
of Hampden-Turner and Trompenaars dimen-
sions listed above are conceptually similar to three
of the dimensions from Hofstede (1980) and
Hofstede and Bond (1988). First, similar to
Hofstede’s individualism/collectivism dimension,
Hampden-Turner and Trompenaars’ (1993)
dimension of individualism/collectivism describes
the degree of integration between members of
society and the relative value of individual over
collective needs. Second, similar to Hofstede’s
(1980) power distance dimension, Hampden-
Turner and Trompenaars’ equality/hierarchy
dimension describes the degree to which a
society accepts an unequal distribution of power.
Third, similar to Hofstede and Bond’s Confucian
dynamism dimension, Hampden-Turner and
Trompenaars’ orientation toward time describes the
emphasis a society places on the relative time
frame of events.
In addition, the Hampden-Turner and
Trompenaars (1993) framework depicts a further
four dimensions of culture that are distinct from
5
those discussed above: universalism/particularism;
analysis/integration; achievement/ascription; and,
orientation toward the environment. Universalism/
particularism is the relative emphasis a society has
on rules of wide generality versus consideration
of special exceptions. Analysis/integration is the
relative emphasis individuals in a society use to
consider events in terms of separable parts versus
consideration of the whole. Achievement/ascription
is the relative emphasis a society has on achieved
status versus ascribed status (i.e., role, age, and
class distinctions). Finally, orientation toward the
environment is the relative emphasis a society
places on individuals’ inner direction versus
(control over the environment) versus outer
direction (being controlled by one’s environ-
ment). Accordingly, we will include these in our
framework as separate dimensions.
As shown in Table II, the integrated frame-
work of culture in this paper consists of the nine
specific dimensions: 1) individualism/collectivism;
2) power distance; 3) uncertainty avoidance; 4) mas-
culinity/femininity; 5) orientation toward time; 6) uni-
versalism/particularism; 7) analysis/integration; 8)
achievement/ascription; and, 9) orientation toward the
environment.
The influence of culture on individuals’
ethical reasoning
This section discusses how each of the four com-
ponent of individuals’ ethical reasoning, as
described by Rest’s Model, is influenced by
several dimensions of culture as described in
Table II. For each component, we draw links to
the cross-cultural and comparative management
literature where empirical evidence suggests a
relationship between a particular cultural
dimension and the particular component of
ethical reasoning. Although comprehensive, this
examination is not exhaustive, as evidence sup-
porting the differential influence of all nine
dimensions of culture for each component of
individuals’ ethical reasoning process has not
been identified nor examined. Nevertheless, for
each component of the ethical reasoning process,
empirical evidence does suggest there is cultural
variation. Thus, it may be inferred that the
6 Linda Thorne and Susan Bartholomew Saunders
cultural influence on individuals’ ethical rea-
soning is pervasive.
Component 1: culture and the identification of an
ethical dilemma
The ethical reasoning process is initiated with the
identification of an ethical dilemma. This reflects
an awareness that the resolution of a particular
dilemma may affect the welfare of others. Adam
Smith (1759, 1776) discusses in The Wealth of
Nations and The Theory of Moral Sentiments, the
variety of motivations, principles, and ground
rules that may be involved in commerce, “even
the general reliability of the exchange mechanism
and the use of implicit contracts . . . turns ulti-
mately on a rich history of norms, mores, trust,
and convention” (Sen, 1997). While the creation
of wealth may be universally viewed as a social
act, the particular norms, mores and conventions
of wealth creation are clearly not universal. For
example, as Hampden-Turner and Trompenaars
(1993, p. 14) observe, Americans and British
follow Smith’s logic almost as physical law,
believing that “if each individual pursues his own
self-interest, an invisible hand will automatically
serve the common interests of the larger society.”
French, Germans and Japanese, however, would
turn that logic upside down, believing that “if
needs of the group are considered first, then the
invisible hand will . . . reach down and auto-
matically take care of the desires of the indi-
vidual.”
A wealth of empirical evidence suggests cross-
cultural differences on the degree of individu-
alism/collectivism that characterizes societies, their
institutions, and the values that individuals hold
(e.g. Hampden-Turner and Trompenaars, 1993;
Hofstede, 1980; Lodge, 1990). Individualistic
societies, such as the U.S. and U.K., imply
loosely knit social frameworks, self-determina-
tion, and responsibility primarily towards oneself
and one’s immediate family (Adler, 1997). At the
institutional level, government assumes a limited
role in industrial development, allowing the mar-
ketplace to regulate competition among firms
(Lodge, 1990). By contrast, more collectivist
societies, such as Japan and Germany, are char-
acterized by more tightly knit social groups,
responsibility towards the broader community,
and collective determination regarding what is
best for the community. At the institutional level,
in nations with a more communitarian orienta-
tion, government takes a more direct role in
defining the needs of the community and setting
the direction of industrial development to help
meet these needs (Lodge, 1990).
As applied to the identification and the sensi-
tivity to the existence of an ethical dilemma, indi-
vidualism/collectivism refers to the degree to which
managers perceive that “the collective” has a
vested interest the affairs of the enterprise. The
greater number of interested parties (multiple
stakeholders) perceived, the more likely an indi-
vidual is to identify an ethical dilemma in a given
situation, as an ethical dilemma is based on the
premise of a conflict of interest between stake-
holders. This in turn suggests that managers from
cultures with collective orientations are likely to
identify the existence of an ethical dilemma in a
broader range of situations than are managers
from cultures with individualistic orientations.
The inclination to see multiple stakeholders
within a given business scenario also relates
to Hampden-Turner and Trompenaars’ (1993)
cultural dimension of analysis/integration.
Analysis/integration refers to the relative orienta-
tion a society’s members to the consideration of
the larger, integrated perspective versus specific,
and often reductive, consideration of separable
parts. As applied to sensitivity to the existence
of ethical dilemmas, analysis/integration refers to
the tendency of individuals to consider factors
and implications beyond the specific domain or
realm that they are responsible for. For example,
in exploring cultural differences on managers’
perceptions of the central goal of a company,
Hampden-Turner and Trompenaars (1993, pp.
31–33) found that American managers, who
score the highest of any cultural group on
analysis, had a stronger tendency to view the
company as primarily a profit-making entity. By
contrast, Japanese, Singaporean, French and
German managers, who are all comparatively
much more integrative in their information pro-
cessing than are Americans, were more likely to
view the company as having the goal, besides
 The Socio-Cultural Embeddedness of Individuals’ Ethical Reasoning in Organizations
making a profit, of attaining the well being of
various stakeholders, such as employees and
customers. A relative orientation towards con-
sidering a situation in relation to other domains
implies that individuals may identify ethical
dilemmas in a broader range of situations
than counterparts with an orientation towards
regarding issues and events as singular and self-
contained.
An individual’s basic perception of ethical
dilemmas also may be influenced by the relative
orientation of his or her society on what
Hofstede (1980) termed the masculinity/femininity
dimension. Masculinity/femininity is the relative
emphasis a society places on achievement versus
overall quality of life. Masculine cultures
encourage individuals to achieve and accomplish
material, concrete objectives, whereas in
feminine cultures, relatively greater value is
attached to overall quality of life (Hofstede,
1980). The implications for organizations in
relatively more “feminine” societies, such as the
Scandinavian countries, are greater awareness and
acceptance in the organization of the time
demands of family responsibilities for both men
and women. Organizational benefits and prac-
tices reflect this value resulting in comparatively
shorter work hours per day and longer parental
leave than offered by organizations from more
masculine societies such as Japan or Austria
(Adler, 1997). Research suggests that in feminine
cultures, managers are more likely to be sensi-
tive to ethical issues involving family-work
conflicts than are managers from masculine
cultures whose identification of corporate ethical
dilemmas may be confined more exclusively to
the domain of organizational life (Vitell et al.,
1993, p. 758).
Finally, orientation toward time may also play a
role in the identification of ethical dilemmas.
Orientation toward time is a long-standing anthro-
pological construct that refers to whether
societies tend to focus relatively more on the past,
present, or future, and whether time is seen as
synchronic or sequential. Orientation toward
time effects the nature of the planning process
in organizations, and the relative consideration of
short-term or long-term implications attached to
actions in the present (Hampden-Turner and
7
Trompenaars, 1993; Lane and DiStefano, 1988).
Cultures with a synchronic view of time tend to
see the future as engaged with the present; this
underpins a longer-term perspective in corporate
decision making, and a consideration of future
generations as being affected by a firm’s actions
in the present. By contrast, cultures with a
sequential view of time tend to see outcomes in
the future as farther away and less directly con-
nected to actions in the present; this underpins
a shorter-term perspective in corporate decision
making, and a myopic focus on the immediate,
near-term effects of one’s actions. The perceived
morality of actions with very long term effects,
such as pollution, loss of the ozone layer or
destroying the rain forest, should thus be
influenced by the orientation towards time that
characterizes an individual’s society. For example,
managers from cultures with a sequential, shorter
term orientation toward time may be less likely
to identify pollution of the environment as an
ethical dilemma, than would managers from
cultures with a synchronic, longer term orienta-
tion toward time.
Component 2: culture and prescriptive judgment
Once an ethical dilemma has been identified,
individuals enter a process of prescriptive rea-
soning in which they formulate the ideal ethical
judgment that ought to occur in a given situa-
tion. In the stage of prescriptive reasoning,
individuals draw on multiple sets of guidelines
for evaluating a given situation. The prescriptive
reasoning of managers is shaped by their own
level of moral sophistication and the ethical
climate in which they operate (Trevino, 1986).
According to Victor and Cullen (1988), ethical
climates are a subset of the broader concept of
work climate. Ethical climates delineate a group
of prescriptive climates regarding organizational
practices with moral consequences and give
workers guidance when faced with a ethical
dilemma. Organizations develop structures and
norms that reflect the myths and rules of society
in order to gain legitimacy (Meyer and Rowan,
1977). The ethical climates of organizations that
shape prescriptive reasoning may thus be regarded
8 Linda Thorne and Susan Bartholomew Saunders
as the institutionalization of the rules and values
of the broader socio-cultural context.
In the stage of prescriptive reasoning, individ-
uals turn to the guidelines prescribed by societal
norms in order to determine what is the right
thing to do. To understand why managers of a
company may perceive that they have a moral
obligation to particular stakeholders, Donaldson
(1989) suggests it is necessary to move beyond
the concept of basic social contract to look at the
source of business responsibility that generates
derivative duties that include personal agree-
ments, specific obligations and laws. These
derivative duties vary under different cultures.
In cultures where individualism is valued, private
individual interests are distinct from that of public
interests. By contrast, in cultures where collec-
tivism is valued, public policy is derived from
“voluntary and informal coordination of con-
flicting objectives through continuous political
bargaining among interest groups, state bureau-
cracies, and political parties” (Katzenstein,
1985, p. 32). For example:
Instead of the sharp distinction between the public
and private sectors common to English speaking
economies, Germany has numerous intermediate
institutions in the public continental law tradition,
charged with the task of reconciling public
and private interests (Hampden-Turner and
Trompenaars, 1993, p. 209).
Collectivist societies thus have stronger institu-
tional norms and structures that reinforce indi-
vidual’s consideration of multiple stakeholders
when formulating the prescriptive component of
the ethical reasoning process. This suggests that
managers from collectivist cultures are more
likely to consider the broader needs of society
in the formulation of prescriptive judgment,
instead of only considering the needs of share-
holders and themselves, as narrowly defined.
Thus, individualism/collectivism, in addition to
influencing the identification of an ethical
dilemma, as discussed earlier, should also influ-
ences the formulation of prescriptive judgement.
In forming prescriptive judgements, who or
where individuals turn to for guidance appears to
be influenced by societal norms such as power
distance (Hofstede, 1980). Power distance describes
the degree to which an unequal distribution of
power is accepted in society. Societies high in
power distance have greater acceptance of
differing degrees of status, power and influence.
In high power distance societies such as Japan,
greater reverence is given to the opinions of one’s
superiors than in low power distance societies
such as the United States. Thus in high power
distance societies, there is a greater tendency to
look externally towards superiors for guidance in
what ought to be done than in low power distance
societies where individuals would be more likely
to look to themselves or to peers for guidance.
Another dimension of culture that may shape
the stage of prescriptive reasoning is uncertainty
avoidance (Hofstede, 1980). Uncertainty avoidance
concerns the degree to which members of
society seek to reduce ambiguity and uncertainty.
In order to reduce uncertainty in high uncer-
tainty avoidance cultures, professional, industry,
and organizational norms of conduct tend to be
highly developed and highly shared. Vitell et al.
(1993) suggest that managers in high uncertainty
avoidance cultures will be more likely to consider
formal professional, industry, and organizational
ethical standards and codes in forming their own
deontological norms than are managers from low
uncertainty avoidance cultures. This in turn
suggests that managers from high uncertainty
avoidance cultures will be more likely to consider
shared norms in the formulation of prescriptive
judgments than managers from low uncertainty
avoidance cultures.
A third dimension of culture that may influ-
ence prescriptive reasoning is universalism/partic-
ularism (Hampden-Turner and Trompenaars,
1993). Universalism/particularlism describes the
orientation of a society’s members to value and
hold sacred universal rules versus the orientation
to confer significance and legitimacy to the par-
ticularities of a situation that may call for special
exception to rules. For example, Hampden-
Turner and Trompenaars (1993, p. 105) note
that:
Americans and Northwestern Europeans like to
state universal truths and rules, and then require
that particular situations and human relationships
submit to those universals and be guided by them,
 The Socio-Cultural Embeddedness of Individuals’ Ethical Reasoning in Organizations
the Japanese reverse these priorities. For them, the
particular relationships of honne, a spirit of intimacy
between persons, is the moral cement of society,
and to the extent that such relationships are
trusting, harmonious, and aesthetic, rules of wider
generality can be derived from them.
In the formulation of a prescriptive judgment,
members of a particularistic society will place
more emphasis on the specifics of a given situa-
tion, including the claims of a friendship, whereas
universal codified rules would have more legiti-
macy to members of a universalistic society. This
suggests that members of a particularistic society
would be more likely to engage in teleological
reasoning, which considers how society would
be better off, than members of a universalistic
society, which considers what is the fundamental
duty or obligation as universally applied (deon-
tological reasoning). More specifically, when
forming a judgement regarding what is the “right
thing to do,” more attention will be paid to the
situation and the people involved in particularistic
cultures, as compared to universalistic cultures
where the same rules are expected to apply to
everyone. Correspondingly, universalistic societies
tend to place high value on and confidence in
the legal system for administering the “one rule
for all” policy. The United States, for example,
which ranks high on universalism, has more than
23 times the number of lawyers per capita as
Japan, a nation which is much comparatively far
more particularistic (Hampden-Turner and
Trompenaars, 1993, pp. 101–102).
Component 3: culture and ethical intention
Ethical intention involves an individual deliber-
ating on which course of action he or she intends
to take to resolve a particular ethical dilemma.
An individual’s ethical intention is based upon
the weight an individual gives ethical values
compared to other non-ethical values. Discrepancies
between an individual’s ethical intention and his
or her prescriptive judgment occur when non-
ethical considerations are more important than
ethical considerations. Ethical intention may be
influenced by culture in a number of ways. In
9
this paper we describe how ethical intention may
vary according to the dimensions of individu-
alism/collectivism, power distance, uncertainty avoid-
ance, and universalism/particularism.
First, the dimension of individualism/collectivism
may again play a significant role in this compo-
nent of ethical reasoning. Moon and Woolliams
(2000, p. 108) suggest that the individualism/col-
lectivism dimension captures the different
meanings ascribed to work and private life. For
example, “in individualistic societies, such as the
U.S. and U.K., it is maintained that work and
private life are emotionally distinct whereas in
some collectivist societies such as Japan the orga-
nization is a source of emotional and material
support”. As a result, the individualism/collectivism
dimension captures the degree to which
managers may be prepared to sacrifice their own
self-interests for that of the common good. In
an individualistic culture, the responsibility is to
one’s immediate self and family whereas in a col-
lectivist culture the responsibility is to one’s
extended family, clan, and community. Tayeb
(1996, p. 85) argues:
. . . in (individualistic) cultures, organizations tend
to follow a narrow set of goals, have few stake-
holders to whom they are accountable, and are less
responsive to the needs and interests of their
employees and their communities alike. In (collec-
tivist) cultures, organizations cater for the interest
of a large number of stakeholders, and are expected
to be part of the society at large and take respon-
sibility for its well being (brackets added).
Thus, as Vitell et al. suggest (1993), the individ-
ualism/collectivism dimension captures the relative
values individuals place upon their own indi-
vidual interests when compared to that of the
collective interests of the groups to which they
belong or have a moral obligation. Because
success in collectivist cultures is evaluated in
terms of the welfare of the group, collectivist
managers are more likely to adhere to prescrip-
tive norms than individualistic managers are. For
example, empirical research shows that Chinese
(more collectivist) are more inclined to recall
faulty products than Canadians (more individu-
alist) (Lee and Sirgy, 1999; Tse et al., 1988). This
may be interpreted according to Ralston’s (1992)
10 Linda Thorne and Susan Bartholomew Saunders
position that individualists tend to view ethical
obligations as a constraint while collectivists are
more concerned with maintaining their moral
ideals of maintaining harmonious relationship
and social justice.
Another dimension of culture that may be
associated with individuals’ tendency to comply
with their prescriptive judgement is uncertainty
avoidance. Uncertainty avoidance is the degree to
which members of society seek to reduce
ambiguity and uncertainty. Uncertainty avoidance
may manifest in the degree to which individuals
tend to be tolerant of deviation from the pre-
scriptive “ideal” when formulating their inten-
tion to act (Hunt and Vitell, 1992). In high
uncertainty avoidance cultures where deviance
from prescriptive norms is less tolerated, we may
infer greater intention of individuals to comply
with their prescriptive judgment of the ideal (i.e.
less deviation between “the ought to” and the
“intention to act”) than in low uncertainty avoid-
ance cultures where deviance from prescriptive
norms in more tolerated. For example, Nakano
(1997) found that Japanese employees (high
uncertainty avoidance) are more likely to act in
accordance with their company’s Code of
Conduct than their American counterparts (low
uncertainty avoidance), as Americans would be
more tolerant of deviations from the prescriptive
norm as represented by the Code of Conduct.
Furthermore, power distance also appears to be
associated with the degree to which individuals’
ethical intention complies with their prescrip-
tive judgement. For example, Lu, Rose and
Blodgett (1999) show that Taiwanese (higher
power distance) placed greater value on the
company and fellow employees than did their
American counterparts (lower power distance).
This suggests that employees with high power
distance tend to place a greater weight on orga-
nizational prescriptive norms, which results in a
tendency to place the organization interests ahead
of their own, when determining their behaviour.
In contrast, employees with low power distance,
tend to place greater weight on their own
personal, ethical codes when determining their
behaviors (Vitell et al., 1993).
Finally, ethical intention to act may also vary
according to the dimension of universalism/
particularism, which is the degree to which to
individuals’ adhere to rules of wide generality
versus special circumstances. Moon and
Woolliams (2000) argue that individuals’ incli-
nation to adhere to a code of ethics may be
related to their degree of universalism/particularism.
Moon and Woolliams suggest that universal
individuals desire to treat everyone similarly;
therefore, they would tend to consider a code
of conduct paramount in their formulation of an
intention to act. In contrast, particularistic indi-
viduals attempt to uphold special circumstances
and relationships in their deliberations; therefore,
they would tend to first consider special rela-
tionships while adherence to an ethical code
would have a secondary influence on their
formulation of an intention to act.
Component 4: culture and ethical action
The final component of Rest’s (1983, 1994)
model of ethical reasoning recognizes that an
individual’s ethical behavior is not always con-
sistent with his or her ethical intention to act.
Cultural differences may influence individuals
tendency to comply with their ethical intentions.
In this paper we describe how this tendency to
act in accordance with ethical intentions may
vary according to the dimensions of Confucian
dynamism and orientation to the environment.
The dimension of Confucian dynamism may
influence the degree to which individuals’ ethical
actions comply with their ethical intentions.
Individuals with a high degree of Confucian
dynamism are more concerned with social
norms, “saving face” and time along a con-
tinuum including the past, present and future as
compared to their counterparts with low
Confucian dynamism (Schwartz, 1992). Generally,
Asian cultures have higher Confucian dynamism
than Western cultures (Hofstede, 1991).
Several studies suggest that individuals with
high Confucian dynamism are more likely act in
accordance with their ethical intentions than
individuals with low Confucian dynamism. This
may be due to the decreased emphasis of the time
as a continuum and “saving face” found in
individuals with high Confucian dynamism as
 The Socio-Cultural Embeddedness of Individuals’ Ethical Reasoning in Organizations
compared to individuals with low Confucian
dynamism. With respect to the relative emphasis
on time, Lee and Sirgy (1999) found that indi-
viduals with low Confucian dynamism are more
task oriented and more likely to view ethical
obligations as constraints than individuals with
high Confucian dynamism who are more likely to
be concerned with maintaining harmonious
relationships. Furthermore, individuals with high
Confucian dynamism appear to be more concerned
with “saving face” than acting ethically than their
counterparts with low Confucian dynamism.
For example, Yao (1987) found that Chinese
managers are more concerned with “saving face”
than honesty, and MacDonald and Kan’s (1997)
found that Western managers were more likely
to engage in “whistle blowing”, and less likely to
protect dishonest subordinates than their Hong
Kong counterparts.
Furthermore, individuals’ ethical actions may
be a function of one’s personal characteristics,
such as ego-strength and locus of control (Nisan
and Kohlberg, 1982) that generally differ along
cultural dimensions. Orientation to the environment,
or locus of control, concerns the sources of moti-
vation and values that guide an individual’s
actions. Hampden-Turner and Trompenaars
(1993) contrast inner-directed cultures which
place greater emphasis on inner-directed judg-
ments, decisions and commitments as guides to
action, with outer-directed cultures, which look
more towards the signals, demands and trends in
the outside world to which individuals and
organizations must adjust. Hampden-Turner
and Trompenaars (1993, pp. 168–170) found a
majority of American managers (76%) to have an
internal locus of control (Rotter, 1966),
“believing that each man and woman has charge
of his or her own destiny and moral direction”
while only 44% of Japanese managers were as
internally-directed. Individuals with higher
internal locus of control are more likely to fulfill
their intentions to act ethically than individuals
with lower internal locus of control (Trevino,
1986; Tsui and Gul, 1996). This in turn suggests
that managers from inner-directed cultures are
more likely than managers from outer-directed
cultures to engage in ethical actions that are
consistent with their ethical intentions.
11
Conclusion: contributions and implications
The main contribution of this paper is to high-
light the pervasive influence of culture on indi-
viduals’ ethical reasoning, and to show that
cultural orientations have differential effects on
different components of individuals’ ethical rea-
soning. The former is illustrated by demon-
strating that each component of individuals’
ethical reasoning process may be potentially
influenced by culture, and the latter is illustrated
by identifying how nine different cultural dimen-
sions may potentially influence various compo-
nents of individuals’ ethical reasoning process.
In so doing, this paper contributes to the stream
of research that has identified the dimensions of
individuals’ ethical reasoning that vary across
culture (i.e., Vitell et al., 1993; Jackson and
Artola, 1997; Izraeli, 1988) by broadening our
consideration of how critical facets of the socio-
cultural system influence different components of
individuals’ ethical reasoning beyond those
previous identified. Although empirical substan-
tiation of the influence of culture on ethical
reasoning remains to be established, the discus-
sion presented in this paper suggests research in
ethical reasoning may consider the influence of
culture on each component of the ethical rea-
soning process. This understanding will be useful
to transnational corporations in their develop-
ment of corporate values and standards and, more
importantly, in communicating and imple-
menting corporate values and standards across
cultural contexts.
It is neither feasible nor desirable for trans-
national organizations to ignore the cultural
dimension of ethical reasoning due to the
diversity of culture in the workplace today. A
major challenge for transnational organizations
is in integrating systems and routines across
geographically dispersed subsidiaries to underpin
firm’s worldwide corporate goals, while at the
same time remaining responsive to the local
organizational norms and routines, in order for
subsidiaries to operate effectively and smoothly
in the local environment (Bartlett and Ghoshal,
1998; Prahalad and Doz, 1987). To the extent
that such routines vary across different countries,
a subsidiary thus faces conflicting models of
12 Linda Thorne and Susan Bartholomew Saunders
behavior, and simultaneous isomorphic pulls,
from both parent firm and local environment
(Westney, 1995). Recent perspectives in inter-
national business ethics address this issue by
calling for transnationals to develop global codes
of ethics that would transcend the bounds of any
singular cultural referent point (cf., Desai and
Rittenburg, 1997; Jackson, 1997; Payne et al.,
1997; Thompson, 1997). Such a trans-cultural
code of ethics would be required to represent “a
sincere attempt to articulate the underlying
essence of trans-cultural agreement to moral
principles” (Thompson, 1997, p. 202). Similarly,
Jackson (1997) calls for a globalization of cor-
porate ethics programs, suggesting that although
a certain amount of cultural relativism needs to
be accommodated, there is a substantial core of
ethical norms for business that can be applied
worldwide. This view implies that ethical
behavior “transcends the legal, political, or
economic climate established by culture or
country” (Payne et al., 1997, p. 1729), and
underscores the possibility of corporate ethics as
a transcultural phenomenon. In order to develop
transcultural codes of corporate ethical conduct
that could be implemented globally, Thompson
(1997) suggests the participation of host nationals
in the formulation of ethical codes of conduct is
critical. In other words, the key management
team responsible for the development of the
global code of conduct would need human
resource representation as transnational as the
company’s business operations (Adler and
Bartholomew, 1992).
However, even if a universal agreement could
be reached on what to place in a global code for
ethical conduct, the global code does not resolve
the problem of the multinational in ensuring
uniform ethical behavior across multiple foreign
operations. The presumed effectiveness of a
global code of ethics is built on the assumption
that a code of conduct is equally meaningful as
a guide to action in different cultures (Langlois
and Schlegelmilch, 1990). The factors that
individuals consider at different elements of the
decision process, and their relative power of
influence, may vary with culture. In other words,
while agreement may be reached upon the content
of a global code of conduct, the processes and
mechanisms through which a corporation may
effectively ensure global compliance with this
code are not universal. In considering the cultural
embeddedness of ethical reasoning, we thus
underscore the practical importance of taking an
explicit process perspective so that transnational
organizations can begin to build knowledge on
the mechanisms that which would be most
appropriate in different cultures for generating
compliance to desired ethical norms.
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Linda Thorne
Schulich School of Business,
York University,
North York, Ontario,
M3J 1P3
E-mail: lthorne@schulich.yorku.ca
Susan Bartholomew Saunders
Faculty of Business,
University of Alberta,
Edmonton, Alberta,
Canada T6G 2R6
E-mail: susan.saunders@ualberta.ca