WHY ETHICS MATTERS:

A DEFENSE OF ETHICS IN BUSINESS ORGANIZATIONS

Manuel Velasquez

Abstract: I argue that Plato was right in claiming that justice is more prof-
itable, more rational, and more intrinsically valuable than injustice, and
that this is particularly true for business organizations. The research on
prisoners' dilemmas and social dilemmas shows that ethical behavior is
more profitable and more rational than unethical behavior in terms of
both the negative sanctions on unethical behavior when interactions
with stakeholders are iterated, and the positive rewards of habitually
ethical behavior when stakeholders can identify those who are predis-
posed to be ethical. In addition, the psychological research on justice
shows that justice is intrinsically valued, both from an outcome and from
a process perspective, and so crucial for business organizations, particu-
larly in terms of organizational effectiveness.

I n an article in the Harvard Business Review Amar Bhide and Howard H.

Stevenson write that "Treachery, we found, can pay," and "There is no
compelling economic reason to tell the truth or keep one's word."^ Bhide and
Stevenson are not the first to suggest that unethical behavior may be more
profitable than ethical behavior. Over two thousand years ago, exactly the
same claim was made by Thrasymachus, a character in Plato's Republic who
concluded that while justice is for the simpleton, injustice is for the wise:
[Socrates:] Well, then, Thrasymachus... suppose you begin at the
beginning and answer me. You say that being perfectly
unjust is more profitable than being perfectly just?
[Thrasymachus:]Yes, that is what I say, and I have given you my reasons...
I affirm injustice to be profitable and justice not...
[Socrates:] And would you call justice a vice?
[Thrasymachus:] No, I would rather say it is a sublime simplicity.
[Socrates:] Then would you call injustice malignity?
[Thrasymachus:]No; I would rather say discretion.
[Socrates:] And do the unjust appear to you to be wise and good?
[Thrasyniachus:jYes.^
As readers of Plato's Republic know, Plato's aim in the Republic is to show
that Thrasymachus is wrong, that injustice is neither more profitable nor more
rational than injustice.
In their article, however, Bhide and Stevenson are on the side of Thrasy-
machus. They assert that their claims are based on the empirical data provided

1996 Business Ethics Quarterly, Volume 6, Issue 2. ISSN 1052-150X. 0201-0222.

202 BUSINESS ETHICS QUARTERLY

by "extensive interviews." It is unclear just what this data is supposed to be,

since they do not bother to provide it in their article. Perhaps they think that the
readers of the Harvard Business Review might not be up to plowing through
tables of numbers and statistics. Instead, what they provide are anecdotes and
snippets of conversations taken, apparently, from their interviews with a variety
of business people. These business people describe incidents where dishonesty
or broken promises paid off and several are quoted as saying that many busi-
nesses "cavalierly break promises" yet suffer no sanctions. What Bhide and
Stevenson's interviews clearly demonstrate is that many business people feel
that unethical behavior in business often pays off.
But it is difficult to see what more we are supposed to leam from these stories
and quotations since they seem to tell us what we already knew: that wrongdoing
sometimes pays and that the good sometimes suffer. The real issue, however,
and the issue that Plato's Republic addresses is this: is there any kind of system-
atic advantage to ethical behavior or any kind of systematic disadvantage to
unethical behavior? That Platonic question is the issue I here want to address.
In particular, I want to ask, is there any kind of systematic advantage that a
business organization or business person, has to gain from just behavior or is
injustice truly more profitable? Like Bhide and Stevenson, however, I will
address this question by appealing to some very unPlatonic empirical data.
Plato, as is well known, had a profound distrust for empirical evidence. In what
follows I will set aside this Platonic distrust for the empirical and base much of
what I say on empirical research findings. A major aim of this essay is to call
attention to this empirical research and to suggest its relevance and importance
to business ethics. Readers who would like to pursue this research further will,
I hope, find my footnotes a helpful guide to the literature on these topics.
Before we turn to answering the question why ethics matters, I should say
something about why the question arises and why, as Bhide and Stevenson's
interviews show, so many business people feel that ethics is for suckers. Phi-
losophersImmanuel Kant, for examplehave often divided moral norms into
two groups: those that impose duties toward others and those that impose duties
toward the self.^ Norms of temperance, moderation, integrity, prudence, indus-
triousness, and chastity, for example, are self-regarding, while norms of honesty,
generosity, trustworthiness, justice, and kindness are other-regarding. Norms
that impose duties toward the self are often justified in terms of the future or
long-term benefits they confer on the self and so it is fairly easy to explain to a
person why these norms should matter to her.'^ The person who is industrious,
for example, is more likely to achieve her long-term aims, the person who
behaves temperately is more likely to avoid being controlled by her passions and
appetites in the short term and thereby more able to achieve her long-term ends,
and the person who cultivates integrity will avoid the inner conflicts that destroy
peace and harmony. Self-regarding norms, then, are justified because obedience
to self-regarding norms, although they may require foregoing immediate grati-
fications, will nevertheless confer more important long-term benefits on the self.
 WHY ETHICS MATTERS 203

Self-regarding norms matter to us, then, because the benefits they confer are
benefits that matter to us.
Other-regarding norms, however, are not so easily justified and so it is not so
obvious why they should matter to us. As philosophers from the time of Aris-
totle have remarked, other-regarding norms directly confer benefits on others.
As Aristotle notes, "Justice is thought to be 'another's good', because it is
related to our neighbor; for it does what is advantageous to another [and] Justice
in this sense, then, is not part of virtue but virtue entire."^ Other regarding
norms, then, which impose duties toward others, raise what is perhaps the classic
question of ethics: why be moral? Why should a person take an interest in
justice when justice benefits others and not the self?
This question is particularly acute in business organizations. Business organi-
zations are deliberately structured to advance the interests of their owners
through profit-optimizing behaviors. Western social ideologies not only legiti-
mate but promote this self-seeking behavior in business; Western legal institu-
tions are designed to protect and support profit-optimizing organizations; and
the economic institutions of industrialized nations are built on the idea that
business behavior is self-interested. Why then should business organizations or
their managers take an interest in ethical norms that impose duties toward oth-
ers? Since business organizations are specifically designed to advance the in-
terests of owners through profit-optimizing behaviors, since such self-interested
profit-optimizing behavior is legitimized by ideology, by law, and by econom-
ics, why should business organizations pursue ethical norms that advance the
interests of others, often at the cost of foregoing profitable opportunities?
In this essay, then, I attempt to update Plato's project of justifying other-re-
garding ethical norms, particularly as these affect business organizations. I will
do this by describing several avenues of research on ethics and their relation-
ship to the management of business organizations. I will try to show that al-
though justice is other-regarding, it nevertheless confers benefits on the
organization and the individual that are akin to the benefits that Plato attributed
to justice. Moreover, I will argue, these benefits are benefits that matter greatly
to profit-oriented self-interested economic agents.
I will begin by looking at what are now called 'Prisoners Dilemmas" or, more
generally, social dilemmas, a topic that has been intensely researched in recent
years, although it has been a topic of discussion by ethicists for hundreds of
years.^ I will then turn to recent investigations into responses to injustice, also
a topic that has been subjected to a fluiTy of recent research although long a
standard topic of interest to moral philosophers.
Research on Prisoners Dilemmas
In a crucial passage in the Republic, one of Plato's characters suggests that
norms of justice can be thought of as the outcome of a cooperative agreement
among people. In a society that lacks norms of justice, he suggests, people
inflict injustices on each other. People quickly conclude that they will be better
204 BUSINESS ETHICS QUARTERLY

off if everyone adheres to norms of justice. People consequently agree to coop-

erate in mutual adherence to norms of justice. However, each individual knows
that he would be better off if he personally defected from following the norms
that everyone else is following, "For no man who is worthy to be called a man
would ever submit to such an agreement if he were able to resist; he would be
mad if he did."'
In this account, justice is characterized as creating the kind of situation that
contemporary game theory calls a "prisoners dilemma."* Prisoner's dilemmas
are situations in which two parties are faced with a choice between two options:
to cooperate in some course of action, or to not cooperate, that is, to defect. If
both cooperate, they will both gain some benefit. If both defect, neither gets the
benefit. If one cooperates while the other defects, the one who cooperates suffers
a loss, while the one who defects gains a benefit.^
This situation is usually summed up in the form of a 2 by 2 matrix:

B
/ \
Defect Coop

Defect -1,-1 +2,-2

A
\
Coop +2,-2 +1,+1

The prisoner's dilemma gets its name from a story that is supposed to illustrate
the kind of situation it represents. The story goes like this: Two thieves arrested
for a crime vow not to betray each other. But the police put them in separate
rooms, and tell each thief the same thing: "If your partner confesses and you
keep silent, he goes free and you get 5 years in prison; if you confess and he
keeps silent, you go free and he gets 5 years in prison. If you both confess, then
you both get 3 years in prison. If you both keep silent, then we'll give you each
1 year in prison on a lesser charge."
The best outcome in a prisoner's dilemma is for both parties to cooperate.
Mutual cooperation will leave them better off than if both defect. However, as
early inquiries in game theory showed, if the parties are rational and self-inter-
ested, they will both choose to defect. Each party will reason as follows: "The
other party will either cooperate or defect. If the other party cooperates, I will
gain more by defecting than by cooperating; and, if the other party defects, I will
also gain more by defecting than by cooperating. In either case, I will be better
off by defecting than by cooperating." Since both parties reason in this self-in-
terested way both end up defecting, and thus both end up losing out. Prisoner's
dilemmas, in short, are situations in which the self-interested behavior of two
parties leaves both worse off than cooperative behavior would.
 WHY ETHICS MATTERS 205

Although prisoner's dilemmas technically involve only two parties, their les-
sons can be generalized to what are more accurately called "social dilemmas,"
situations in which several parties each face a prisoner's dilemma situation with
respect to the other parties. The members of a commodity cartel, for example,
will all benefit if all charge an agreed-upon high price for the commodity. But
each member knows that if the others stick to the agreement, he has more to gain
by selling the commodity at a lower price, while if the others do not stick to the
agreement, he will also be better off selling at a lower price. Since all will
reason this way, the cartel breaks down, prices fall, and all the members of the
cartel end up worse off than if they had cooperated in the agreement. Studies
have indicated that large groups in a social dilemma are rarely able to secure
cooperation, especially if they expect not to interact frequently, ^o
Prisoners dilemmas, in the form of social dilemmas, mirror many of the kinds
of social situations with which our lives are filled, i.e., situations in which
several people have a choice between cooperation or non-cooperation and in
which the self-interested pursuit of non-cooperation leaves all worst off than
cooperation. In addition to cartels, such situations include contracts and agree-
ments or promises, honor systems, market competition, military arms races, the
game of chicken, the provision of public goods, the "NIMBY' ("Not In My Back
Yard") syndrome, the consumption of unowned resources, the free rider phe-
nomenon, and, of course, ethics. Ethical norms can be interpreted as norms that
put us in a prisoners' dilemma situation. For example, when two individuals talk
with each other, they have a choice of cooperating in the norm of telling the
truth, or they can try to take advantage of each other by lying to each other.
When two individuals make an agreement, they have a choice of cooperating in
the norm of keeping their word, or they can try to take advantage of each other
by breaking the agreement. When individuals who each own a piece of property
interact, they have a choice of cooperating in the norm against theft, or they can
try to take advantage of each other by stealing each other's property. Being
ethical, then, can be thought of as a kind of cooperation between individuals: it
is cooperating in the moral norms that sustain our fundamental institutions such
as the institution of language, of contract, and of property, and, more generally,
the social conditions that make an orderly and flourishing human life possible.
Being unethical, on the other hand, can be conceptualized as an attempt to take
advantage of others by breaking the moral norms that others are following.
Seeing ethics in terms of the prisoner's dilemma suggests an explanation for
two common observations business people make about ethics. First, business
people often acknowledge that the business world would be a better place if
everyone behaved ethically. This is what the prisoner's dilemma analysis of
ethics would suggest since mutual cooperation in the norms of ethics is mutually
beneficial; in particular we all gain the benefit of stable social institutions and
an orderly and flourishing society if everyone cooperates in the moral norms that
sustain these. But, secondly, business people just as often suggest, as Plato's
Thrasymachus did, that ethical behavior in business is for suckers. And this.
206 BUSINESS ETHICS QUARTERLY

again, is what the prisoner's dilemma suggests since the person who sticks to
ethics will lose out when she encounters a person who takes advantage ofher by
being unethical. The ethical person, then, is in a prisoner's dilemma and so
appears to be at a disadvantage when dealing with an unethical one.
And, as a matter of fact, the central lesson of the prisoner's dilemma is that
when individuals deal with each other in a prisoners dilemma situation, it is in
each person's individual interest not to cooperate but to try to take advantage of
the cooperation of the other party. Why, then, are people ever ethical? If, as
Thrasymachus suggests, injustice pays off, why are people ever just? The Pris-
oner's Dilemma analysis raises in very stark form the question with which we
began: why be ethical if getting away with being unethical pays better than being
ethical?
Part of the explanation for why ethics matters lies in an unreal assumption we
have so far been making. We have assumed that the people who meet in a
prisoners dilemma interact with each other only once. In fact, as the prisoners
dilemma analysis of ethics suggests, unethical behavior will pay off in a one-
time meeting when the person who is taken advantage of cannot get back at the
person who took advantage of her. This is perhaps the reason why ostensibly
unethical behavior emerges in those exchanges in which parties interact only
once, such as in the sale of cars or other big-ticket items, or exchanges in which
the parties cannot identify each other, such as in freeway driving.
However, the situation is quite different when interactions are iterated and are
between individuals who are known to each other; for example, when individu-
als have to deal with each other repeatedly or have on-going relationships with
each other. When individuals can identify each other and have to deal with each
other in repeated prisoner's dilemma situations, those who continue to try to take
advantage of the other party can be made to suffer sustained losses, while those
who learn to cooperate with the other party can make the largest gains.
The crucial factor that is at work when identifiable people deal with each other
repeatedly, of course, is that when one party takes advantage of the other in one
interaction, the injured party remembers this and can retaliate by doing the same
in the next interaction. Through mutual retaliation, the parties can enforce
cooperation, and a stable pattern of mutual cooperation can emerge. This phe-
nomenon has been extensively studied in contemporary game theory. Axelrod,
in particular, has shown that in a series of repeated prisoners' dilemma encoun-
ters, the best strategycalled TIT FOR TAT is for a party to cooperate initially
but to retaliate with non-cooperation each subsequent time the other party fails
to cooperate.'' Because of this continuous threat of retaliation, it is more ra-
tional for the parties to a series of repeated exchanges to cooperate with each
other than to fail to cooperate. And cooperation, of course, brings with it the
mutual advantages of mutually beneficial activities. Thus, where individuals
have to deal with each other repeatedly, and where the threat of retaliation is
present, it is better to cooperate with the other party than to try to take advantage
of them.
 WHY ETHICS MATTERS 207

The implications of the prisoners' dilemmas research for ethics in business are
fairly clear. Business interactions with its stakeholdersemployees, custom-
ers, suppliers, creditors, and stockholdersare usually repetitive and on-go-
ing.'^ Consequently, if a business attempts through unethical behavior to take
advantage of these or other stakeholders in today's interaction, they can usually
find some way to retaliate against the business in tomorrow's interaction. The
retaliation can consist of as simple an act as refusing to buy from, work for, or
do business with the unethical party; or it may be a more complex form of
retaliation such as sabotage, absenteeism, pilferage, organizing boycotts or other
forms of getting others to refuse to do business with the unethical party, or
getting even by inflicting other kinds of covert or overt injuries. Simply put, it
is shortsighted for management to try to take advantage of these groups through
unethical behavior. It is possible for a business to sometimes get away with
unethical behavior, but in the long run, if interactions between identifiable
parties are iterated and retaliation is a realistic option, unethical business behav-
ior tends to he unprofitable and non-rational, while, ethical behavior will reap
the rewards of mutual cooperation.
Although the threat of retaliation in repeated interactions goes some way
toward explaining why ethics matters in business, still the explanation does not
take us very far in making ethics more appealing. This is because the explana-
tion assumes a negative motivation for ethical behavior. In effect it says that
ethics is preferable because unethical behavior is punished. This provides a
negative incentive for avoiding unethical behavior, but does not show that ethi-
cal behavior is itself an attractive option. A more satisfying justification of
ethics would show that ethical behavior itself is desirable because it is benefi-
cial. In fact, that was Plato's hope in the Republic. Plato aimed to show that
ethical behavior was not merely a lesser evil, to be preferred over the greater
evils that unethical behavior entailed, but that ethical behavior itself was advan-
tageous.
In fact, a more positive explanation of why justice matters can be found in the
work of the economist Robert Frank, Frank's research, like the prisoners' di-
lemma research, looks at situations in which people have a choice between
cooperating with or taking advantage of others.^^ Frank's analysis, however, is
aimed at investigating whether it is better for a person to habitually cooperate
with others or to habitually take advantage of others, when that person is living
in a population of people some of whom habitually cooperate and some of whom
habitually take advantage of others. Since, as I have argued, ethics is a kind of
cooperation in the rules that support our fundamental social institutions, the
question comes down to this: is it better to be habitually ethical or unethical in
a society that consists of both ethical and unethical people? Plato, in the Repub-
lic, answered this question in the affirmative, arguing that the person who is
habitually just will enjoy important reputational benefits. '^
Frank's studies provide ingenious support for Plato's claim that ethical behav-
ior is itself beneficial. Frank uncovered two important facts about human be-
208 BUSINESS ETHICS QUARTERLY

havior. First, he found that people send fairly reliable signals to each other
regarding whether they habitually cooperate in keeping to rules and agreements,
or whether they habitually attempt to take advantage of others. Signals of one's
predisposition to be cooperative include visual cues such as facial expressions,
auditory cues such as tone of voice, and past history such as is embodied in
reports from others and in reputation. Frank's studies showed that people can
accurately identify cooperative predispositions about 75 percent ofthe time, and
can accurately identify non-cooperative predispositions about 60 percent of the
time.
Secondly, Frank's studies showed that when people interact with each other
and can choose the persons with whom they interact, they more often choose to
interact with those whom they believe habitually cooperate in the rules of ethics
and avoid those whom they believe will try to take advantage of them. That is,
people try to avoid those who are unethical, and seek out those who are ethical.
Frank argued that these two factorsthe ability to identify ethical and unethi-
cal predispositions, and the tendency to seek out those who are ethical and avoid
those who are unethicalimply that it is more advantageous to be habitually
ethical than unethical. Because ethical people seek each other out and avoid
unethical people, they will tend to increase the frequency of their dealings with
each other. Ethical people will therefore increase the frequency with which they
engage in mutually cooperative and thus mutually beneficial exchanges. On the
other hand, unethical people will be avoided by ethical people and so they will
be forced to deal with other unethical people. As a result, unethical people will
tend to increase the frequency of their dealings with each other, and in these
dealings each will try to take advantage of the other in a mutually destructive
exchange. Frank's conclusion is that habitually ethical people will more often
have mutually advantageous relationships with other ethical people while ha-
bitually unethical people will more often have mutually destructive relation-
ships with other unethical people. In the long run, it turns out that habitually
ethical people end up with larger gains than habitually unethical people.
Frank's research has clear implications for ethics in business. His findings
imply that employees, for example, have fairly reliable ways of discovering
whether a manager or even a team of managers is habitually ethical or unethical.
His research implies, further, that given the choice ethical employees will tend
to seek to deal more with those whom they identify as ethical than with those
who are unethical: that is, ethical employees will tend not to enter or to exit
organizations when they learn those organizations are staffed by managers who
deal unethically with their employees, and they will tend to enter and remain
loyal to organizations staffed by ethical managers. Unethical managers, on the
other hand, will be left with the unethical remainder. Consequently, over the
long run and for the most part, ethical managers will tend to have mutually
cooperative interactions with ethically reliable employees and together with
them will create mutually beneficial corporate enterprises, while unethical man-
agers will more often tend to find themselves in mutually destructive interac-
 WHY ETHICS MATTERS 209

tions with unethical employees and together with them create dysfunctional
enterprises.'5 Habitually ethical management is more advantageous over the
long run, than habitually unethical management.
The prisoners' dilemma research is thus fairly supportive of the Platonic view
that adherence to other-regarding norms of ethics confers benefits on the agent.
First, adherence to other-regarding norms avoids injurious retaliation in on-go-
ing relationships with customers, employees, suppliers, and creditors. Second,
habitual adherence to other-regarding norms will increase the frequency with
which managers will find themselves in mutually beneficial interactions with
ethical employees, while habitually unethical behavior will increase the fre-
quency with which managers will find themselves in mutually destructive rela-
tionships with unethical employees.
These results, however, are still not very satisfying, and Plato, particularly
would find them unpalatable. The research we have reviewed so far suggests
that over the long run unethical behavior in iterated exchanges tends to be
punished and ethical behavior tends to be rewarded. So ethics is here being
motivated by external rewards and punishments. The prisoners dilemma re-
search takes an instrumental view of ethics; ethics is to be pursued because of
its instrumental value in securing other goods and avoiding other evils. In this
approach, ethics is not desired for itself, but for its accompaniments. But Plato
had a more ambitious aim: His aim was to show that ethical behavior is intrin-
sically desirable. Is it possible to show that ethical behavior is desirable not
because of its instrumental value, but because of its intrinsic value?
Psychological Research on Justice
To begin to answer this question, let me turn to a different stream of current
research on ethics. This is the psychological research on how people respond to
justice and injustice. This research, I believe, suggests a view of ethicsor at
least of that portion of ethics that we refer to as "justice"that is more in
keeping with the view of Plato. Plato, as I noted, rejects the instrumental
conception of ethics embedded in the prisoners dilemma analysis of ethics.
Instead, Plato wanted to show that ethics in general but justice in particular is
"among the goods that are desired for their own sake."^^ Does cunent psycho-
logical research on justice support Plato?
Psychological research on justice originated in this century in the theories of
George C. Homans'' which J. S. Adams'* adapted for his research on how
workers respond to unfairness in the work place, in particular to inequity in
compensation, a form of distributive justice. (Distributive justice refers to the
fairness of the way in which benefits and burdens are distributed among the
members of a group.) Adams hypothesized that a worker compared the compen-
sation he receives for the work he does to the compensation other similar work-
ers receive for the work they do. If the proportions between the amount of work
ind the amount of compensation is equal for all workers, workers would per-
ceive their situation as just or equitable. However, if a worker believes that he
210 BUSINESS ETHICS QUARTERLY

or she is being paid less than others for a comparable amount of work, or if the
worker believes he or she is being paid more than others for a comparable
amount of work, the worker will regard the situation as unjust and will take steps
to reestablish justice. Interestingly, this definition of justice is exactly the same
definition that Aristotle proposed several centuries earlier. ^^
Adam's own studies and those of other researchers strongly supported his
hypothesis.^*^ Workers do in fact compare the proportion between the pay they
receive and the work they do to the proportion hetween the pay and work of
other similar workers, and they take steps to change things when they believe
their compensation is unjust. In particular, workers who believe they unjustly
are being paid more than others will feel guilty and will work harder, while
workers who believe they unjustly are being paid less than others will feel angry
and will lower their performance or take other action such as complaining to
supervisors, sabotage, or finding another job. Distributive justice matters to
workers.
Adam's theory was generalized and extended beyond work situations to apply
to all social interactions by Elaine Walster and her associates.^' Walster theo-
rized that societies evolve norms of justice and induce their members to accept
and follow these norms. Societies generally reward their members when they
treat others justly, and punish those who treat others unjustly. Individuals who
are treated unjustly or who see others being treated unjustly, will become dis-
tressed and they will attempt to eliminate their distress by engaging in actions
aimed at restoring justice.^^ Like Adams, Walster defined justice as obtaining
when the proportion perceived to obtain between a person's contribution to a
group and her rewards from the group equals the proportion perceived to obtain
between other people's contributions and their rewards.
In a series of studies Walster and her associates found plentiful evidence
supporting her view that individuals in all social situations will react to injustice
with distress and will attempt to eliminate their distress by restoring justice.
Walster emphasized, however, that individuals may attempt to relieve their
distress either by altering the actual situation, or by altering their perception of
the situation. If it is called to a worker's attention, for example, that he or she
gets less pay than others for working the same hours they do, the worker may
attempt to alter his or her situation by demanding more pay. However, if the
worker is not in a position to do anything about the situation, the worker may
instead respond by deciding that in spite of appearances the other workers are
really contributing more than he or she, perhaps because they must be working
harder or because their work is of a higher quality. In short, when people
perceive an unjust situation, they either change the situation to a more just one,
or they change their perception of the situation to make it appear to them to be
more just.^^
Further psychological research on distributive justice amended Walster's find-
ings in two important directions. First, researchers found that under certain
conditions people respond to injustice by neither changing their situation nor by
 WHY ETHICS MATTERS 211

changing their perceptions hut hy doing nothing. In particular, people will

respond to injustice hy doing nothing when the injustice is attrihuted to uninten-
tional hehavior, or to environmental causes, or to a temporary aherration.^^
People's responses to injustice are also affected hy the extent to which they
helieve they are personally responsihle for the injustice, hy their ahility to
correct the injustice, and hy the costs of acting to remedy the situation.^^
Secondly, and more importantly for our purposes, researchers found that the
principle of proportionality is not the only principle of distrihutive justice that
human heings recognize and emhrace. Researchers have found three main
norms of justice to which people respond: (1) The principle of proportionality
or "equity" that says that rewards are just when they are proportional to each
individual's contdhutionthe principle of distrihutive justice originally hy-
pothesized hy Aristotle and investigated hy Adams and Walster; (2) the equal-
ity principle which says that rewards are just when all individuals are given
equal rewards; (3) the need principle which says that rewards are just when
allocated according to individual need.^^ Studies hy M. Deutsch, T. Schwinger,
and others indicate that people see the principle of contrihution as appropriate
when they are working in groups where relationships are impersonal and com-
petitive or where goods are produced hy independent work as in piecework
johs.2'' Interestingly, use of the principle of proportional justice to allocate
rewards in organizations tends to promote an even more competitive atmosphere
in which resources and information are not shared and in which status differ-
ences emerge^* On the other hand, people seek to he treated according to the
principle of equality when working in groups that exhihit solidarity and where
tasks require cooperation. And, again interestingly, use of the equality principle
in groups tends to increase solidarity and harmony among group memhers and
to enhance cooperative activities.'^ Finally, people tend to recognize the prin-
ciple of need when working in groups whose memhers exhihit high levels of
interpersonal attraction and the shared goal of promoting each other's welfare.
Although use of the need principle may enhance a group's emotional honds, it
is also possihle that memhers who are given goods hecause of their need may
see this as humiliating and so avoid it.'^
The research on distributive justice ohviously shows that justice matters to
people and that people are motivated powerfully hy specific forms of distrihu-
tive justice in specific contexts. But does the research support Plato's view that
justice is desired for itself?^' A numher of studies examining the conditions
under which the various principles of justice are favored, suggest that even when
workers will get less compensation by insisting on adherence to a particular
principle of distributive justice, they still demand adherence to that principle if
they feel it is appropriate for their situation.^^ Less productive workers, for
example, working at competitive tasks for which proportional justice would he
the appropriate standard of compensation, will demand proportional justice even
though this means they personally will get paid less than if they demanded
justice of equality. And highly productive workers in cooperative tasks for
212 BUSINESS ETHICS QUARTERLY

which an equal distribution of rewards would be appropriate will demand justice

of equality even when this means they will get paid less than if they demanded
proportional justice. These studies suggest that workers see adherence to the
appropriate principle of distributive justice as intrinsically desirable entirely
apart from the personal advantages (or disadvantages) of that form of distributive
justice (although personal advantage always remains a competing motivator).
A similar conclusion is indicated by studies of the extent to which people will
choose justice over self-advantage. In one set of experiments two subjects are
gratuitously given a sum of money to divide between themselves.^^ The first
subject decides how the money will be divided between the two without any
input from the second subject, who, however, gets to decide whether the two will
get the money at all. Since neither person has done anything to merit a larger
share of the money, the appropriate principle of distributive justice is that of
equality. And, in fact, in most experiments the first subject tended to divide the
money more or less equally, suggesting a desire for distributive justice that
outweighed the desire to take a much bigger share. Moreover, when the division
of money was extremely unequal, the second subject usually rejected the offer
even though this meant foregoing whatever money they would have received.
Thus, distributive justice matters a great deal to people, and a large proportion
even will forego gains to themselves for the sake of justice. In an even more
convincing experiment, the second person was given no choice in the matter at
all, so that the first person both determined the division of money and decided
whether to take the money.^* Surprisingly, although the subjects making the
division could have taken all of the money for themselves, they did so only 36%
of the time, indicating that most people most (64%) of the time will forego
personal gains for the sake of justice.
The research on distributive justice, then, suggests that people desire distribu-
tive justice for itself and not merely for its external advantages and that this
desire is a powerful motivating force, often, but not always, even overriding
personal advantage. This conclusion has important implications for profit-ori-
ented business organizations, particularly insofar as the research shows that
people's desire for justice will motivate them to take steps to ensure that justice
prevails, even when this means foregoing advantages to themselves. It must
matter to businesses, for example, that employees seek distributive justice in
compensation and work assignments, and will take steps to ensure that work
burdens are justly proportionate to compensation. In particular, if employees
believe they are not being paid enough for the work they are doing in compari-
son to others, they will likely adjust their work output downward, perhaps by
putting forth less effort, perhaps by taking days off from work, or perhaps by
otherwise lowering their productivity.^^ People outside a business will also
react negatively to violations of distributive justice in ways that must matter to
a business. Customers, for example, will turn against a company if they believe
that it is unjustly charging more than it should for a product, as may happen, for
example, when an essential commodity is in very short supply.^^ Finally, it must
 WHY ETHICS MATTERS 213

matter to business that task performance is affected by the kind of distributive

justice that prevails in an organization; compensation systems based on the
principle of contribution create a competitive atmosphere in which resources
and information are not shared, while compensation systems based on the prin-
ciple of equality encourage cooperation and the sharing of resources and infor-
mation. Clearly, then, distributive justice is intrinsically valuable to the
employees, customers, and others with whom businesses deal, and for this rea-
son it has to matter to businesses.
But we have not quite made the full case for justice, at least as Plato would
have wanted it made. Plato claimed not only that justice was desired for itself,
but that it was creative of a situation that was intrinsically desirable. Plato's
deepest defense of justice is based on the idea that justice is intrinsically valu-
able because it consists of an order and harmony among the members of a group
that is itself intrinsically desirable. As he puts it early in the Republic: "injustice
creates divisions and hatreds and fighting, and justice imparts harmony and
friendship."^^ Does contemporary psychological research on justice support the
view that justice is intrinsically desirable because it is constitutive of a harmony
and order that is intrinsically desirable?
To answer this question, I want to turn to examine one final direction in which
the research on justice has expanded. The early research on justice that we just
examined (by Adams, Walster, and others) focused on the fairness of outcomes
and not on the fairness of the processes by which these outcomes were deter-
mined. In short, it focused on distributive justice, not on procedural justice.
Recent research on justice has looked more closely at the fairness of procedures
of allocation and distribution, such as grievance procedures, courtroom prac-
tices, evaluations of students, employee performance evaluation, the methods by
which wages are set, the processes through which people are hired, fired, and
promoted, the processes through which organizational decisions are made, and
more generally, any decision-making process that results in the allocation of
benefits or burdens. Do these studies of procedural justice shed any additional
light on the intrinsic desirability of justice in business organizations?
The first studies on procedural justice found that dispute resolution processes
in which the parties to a dispute are allowed to provide their own input into the
process are seen as fairer than processes that deny parties any direct input.-'*
These studies also indicated that when processes embodied procedural justice,
the institutions or processes themselves were respected and valued by the par-
ticipants.^^ Indicative of this was the fact that when decisions were made
through processes that allowed for direct input, the decisions that emerged from
the process were embraced and accepted as legitimate by the affected parties, to
an extent not present when exactly the same decisions were made through
processes that did not allow such input."^" Moreover, subsequent studies in a
variety of social contexts showed that decision-making processes and institu-
tions that allow affected parties direct mput into the process, are judged to be
more just than those which don't, and that such just processes and institutions.
214 BUSINESS ETHICS QUARTERLY

as well as the decisions reached through them are more likely to be accepted by
affected parties, more likely to be seen as legitimate by the parties involved, and
more likely to be complied with by the parties involved.'*' Studies of workers,
for example, have shown that when a system of employee evaluation allows
workers to express their viewpoints and feelings and to communicate informa-
tion about themselves and their work, they judge it to be more fair and are more
likely to be satisfied with the process and more acceptant of their final evalu-
ations regardless of whether the evaluations are low or high."*^ Other studies
have shown that employee evaluation systems are also judged as fair and valued
when they are consistent and they communicate and rely on accurate informa-
tion, factors that also contribute to acceptance of, and compliance with, proc-
esses and their outcomes."*^ Some experimental models have suggested that the
fairness of procedures is further determined by the extent to which they provide:
adequate methods of selecting decision-makers, adequate procedures for setting
and communicating the ground rules that will determine rewards, suitable meth-
ods of gathering and communicating the information on the hasis of which the
rules are applied, suitable decision-making mechanisms in the application of
rules, safeguards against the abuse of power, procedures for appeals, and mecha-
nisms for change that can represent the concerns of all participants.'*^
The research on procedural justice has provided a number of additional indi-
cations that organizational participants respect and attribute intrinsic value to
processes that are just. One set of studies showed that when employees feel that
an organization's decision-making processes are just they exhibit lower levels
of turnover and absenteeism, and higher levels of trust and commitment to the
organization and to its management.''^ And when employees believe an organi-
zation's decision-making processes and procedures are just, they are more will-
ing to follow organizational leaders, more willing to do what they say and more
willing to see their leadership as legitimate."*^ In short, employees become
committed to the just organization and remain loyal to it and willing to accept
and follow its leaders. On the other hand, employees are repelled by the unjust
organization and respond to organizational injustice with disaffection, disloy-
alty, and resistance to organizational leaders and their commands.
Organizations constituted of decision-making processes that are just, then, are
valued by participants and endowed with respect. But is there any direct empiri-
cal evidence that just organizatonal procedures are valued for themselves in-
stead of merely for the benefits they instrumentally provide their members?
This is an extremely difficult question to answer with certainty, since it is
possible that people value just processes because at some level they believe that
just processes are likely to provide them with larger rewards than unjust ones.
Nevertheless, there are some studies that indicate that people place some value
on just procedures that is independent of the extent to which such procedures
personally benefit them."*' Although certain studies have shown that just proce-
dures have instrumental value for their participants, these same studies have
demonstrated that just procedures are also imbued with noninstrumental or
 WHY ETHICS MATTERS 215

intrinsic value."** For example, in one study, two groups of workers were both
allowed to say what they thought would be an appropriate amount of work to
perform in a given time.'*' But while the amount of work for one group was
adjusted in accordance with their input, the other group was told that although
their input was being solicited, the amount of work they had to do had already
been decided and their input would have no effect on the amount of work they
would be asked to perform. A third, control group, was not allowed even to say
what they thought would be an appropriate amount of work, and their work was
simply assigned to them. Not surprisingly, this third group did not judge this
process to be particularly fair. But the other two groups, even those who knew
their input would have no effect on the outcome, rated the process as fair. Thus,
procedures are judged to be fair, and so are desired, even apart from their
instrumental value. It has been suggested, in fact, that procedural justice is
desirable not for its instrumental value, but because it communicates that those
who are treated justly (for example, those whose opinion or "voice" is solicited)
are valued, respected, and accorded dignity.^'^ The empirical evidence we have,
then, suggests that Plato was entirely right: justice is intrinsically desirable
because it creates an intrinsically desirable organizational order, an order that
communicates value, respect, and dignity, and so an order which elicits trust,
organizational commitment and loyalty, which leads participants to attribute
legitimacy to the organization's leaders and their decisions, and which leads
participants to accept and implement organizational decisions. When an organi-
zation is constituted of processes that are seen as just, participants in the organi-
zation cleave to the organization itself: they embrace it, respect it, and are
intensely loyal to it and its leadership.
This research on procedural justice has highly significant implications for
business organizations. Simply put. organizations that are comprised of proc-
esses that are just are better organizations in that they function better than those
that are not. This point can be made clearer in terms of the concept of organiza-
tional effectiveness. Organizational effectiveness has been variously defined as
(1) an organization's ability to attain its goals, (2) its ability to secure needed
resources from its external environment, (3) the quality of an organization's
internal processes and information, and (4) an organization's ability to at least
minimally satisfy all of its strategic constituencies, including suppliers, consum-
ers, employees, and so on.^' The research on procedural justice demonstrates
that procedural justice has a positive impact on each of these elements. Proce-
dural justice enhances an organization's ability to attain its goals because when
organizational decision-making processes are just, they impart a legitimacy to
the organization leaders and acceptance of their decisions that enables them to
lead the members ofthe organization toward its goals. Procedural justice enables
the organization to secure and keep that most strategically important resource:
committed employees; when just procedures are an embedded part of an organi-
zation, the organization commands the respect, trust, and commitment of current
and prospective employees. Procedural justice enhances the organization's in-
216 BUSINESS ETHICS QUARTERLY

temal processes and channels of communication by creating organizational co-

hesion and harmony that translate into a cooperative willingness to work to-
gether, communicate fully and openly, and share information and resources.
And procedural justice enhances an organization's ability to minimally satisfy
its strategic constituencies because its constituencies will perceive the share of
organizational resources allotted to them as fair and acceptable. In sum, proce-
dural justice is essential for organizational effectiveness. And, surely, nothing
can matter more to a business organization, whatever its strategic goals, than the
fundamental means to those goals: organizational effectiveness.
Conclusion
We have argued, then, that Plato was right: justice is more profitable, more
rational, and more intrinsically valuable than injustice, even in business. The
research on prisoners' dilemmas shows that ethical behavior is more profitable
and more rational than unethical behavior in terms of both the negative sanctions
on unethical behavior and the positive rewards of ethical behavior; and the
psychological research on justice shows that justice is intrinsically valuable,
both from an outcome and from a process perspective, and so crucial for busi-
ness organizations, particularly in terms of organizational effectiveness. There
is, undoubtedly, much more to be said for ethics and justice in organizations.
There is reason, for example, to suspect that the just organization is one in which
morale is high and in which members are motivated to work harder and more
productively at achieving organizational goals, and reason to suspect that the
justice of an organization bears some significant relationship to its stability, i.e.,
its ability to maintain its essential functions through periods of stress and in
turbulent environments.'^ But enough has been said to show that Plato was
correct and that Thrasymachus and his modern counterparts are wrong. Ethics
in general and justice in particular matter tremendously for the profit-oriented
self-interested business organization.

Notes
1. Amar Bhide and Howard H. Stevenson, "Why be Honest if Honesty Doesn't Pay," Harvard
Business Review (September-October 1990), pp. 121-29.
2. Plato, The Republic, Bk. II, several translations.
3. Immanuel Kant, Groundwork ofthe Metaphysics of Morals, (1785), section two, many
translations
4. Something that Kant points out in his Groundwork ofthe Metaphysics of Morals, section
two.
5. Aristotle, Nicomachean Ethics, (date unknown, c. 350 B.C.) Book 5, ch. 1
6. See Plato, below, and, a bit more recently, Thomas Hobbes, Leviathan.
7. Plato, The Republic, book two, Jowett translation. It is worth quoting the entire passage:
[Glaucon:] They say that to do injustice is, by nature, advantageous; to suffer injustice,
evil; but that the evU is greater than the advantage. And so when men have both done and
 WHY ETHICS MATTERS 217

suffered injustice and have had experience of both, not being able to avoid the one and
obtain the other, they think that they had better agree among themselves to have neither;
hence there arise laws and mutual covenants; and that which is ordained by law is termed
by them lawful and just. This they affirm to be the origin and nature of justice;it is a
mean or compromise, between the best of all, which is to do injustice and not be
punished, and the worst of all, which is to suffer injustice without the power of retali-
ation; and justice, being at a middle point between the two, is tolerated not as a good, but
as the lesser evil, and honored by reason of the inability of men to do injustice. For no
man who is worthy to be called a man would ever submit to such an agreement if he were
able to resist; he would be mad if he did. Such is the received account, Socrates, of the
nature and origin of justice."
As I note below, Plato ultimately rejects this account of the origins of justice.
8 Anatol Rapaport and A. Chammanah, Prisoner's Dilemma (Ann Arbor: University of
Michigan Press, 1965).
9. For a non-technical and fascinating overview of the history and significance of prisoner's
dilemma research, see William Poundstone, Prisoner's Dilemma (New York: Anchor Books
Doubleday, 1992).
10. Natalie S. Glance and Bernardo A. Huberman, "The Dynamics of Social Dilemmas,"
Scientific American, vol. 270, no. 3, (March 1994), pp. 76-81.
11. Robert Axelrod, IJie Evolution of Cooperation (New York: Basic Books, Inc., 1984); an
earlier and more compact summary of the computer studies Axelrod carried out is in Robert
Axelrod, "More Effective Choice in the Prisoner's Dilemma," Journal of Conflict Resolution,
vol. 24, no. 3 (September 1980). pp. 379-403. For a summary of more recent theoretical and
empirical research on iterated Prisoner's dilemma, see Robert Axelrod and Dougliis Dion, 'The
Further Evolution of Cooperation," Science, vol. 242, (9 December 1988), pp. 1385-1390.
12. Although subject to multiple definitions, we can here define a stakeholder as any
individual or group that can affect and be affected by the operations of a firm, and so can be
said to have a "stake" in what the firm does See R. E. Freeman, Strategic Management: A
Stakeholder Approach, (Marshfield, MA: Pitman, 1984). As the prisoners' dilemma analysis
that follows suggests, stakeholder power to affect the operations of the firm coupled with the
likelihood of repeated interactions makes it both irrational and unprofitable for the firm to
behave unethically toward its stakeholders.
13. Robert Frank, Passions Within Reason: The Strategic Role of the Emotions (W.W. Norton
& Company, 1988). A shorter summar>' of Frank's ideas can be found in Robert H. Frank,
"Beyond Self-interest," Challenge, (March-April, 1989), pp. 4-13.
14. As one of the characters in the Republic asserts: "Parents and tutors are always telling
their sons and their wards that they are to be just; but why? not for the sake of justice itself,
but for the sake of appearances and reputation; in the hope of obtaining for him who is reputed
just some of those offices, marriages, and the like which [are] among the advantages accruing...
from the reputation of justice." Plato, Republic, book two, Jowett translation.
15. Robert Cialdini of Arizona State University has recently suggested a model of organ-
izational change that would identify some of the specific organizational processes through
which organizations that train, condone, or allow dishonest practices toward chents, custom-
ers, vendors, and distributors, gradually filter out ethical employee behavior and increase the
levels of unethical organizational behaviors. His model, labeled the "triple tumor structure
of organizational dishonesty," suggests three organizational consequences of dishonest prac-
tices. First, in order to boost its performance, a company may initiate some dishonest practice,
say, training door to door sales representatives to misrepresent their wares or to take advantage
of customer gullibilities or vulnerabilities. This initial introduction of dishonesty into the
218 BUSINESS ETHICS QUARTERLY

operations of the firm may yield short-term profits. However, the dishonest treatment of
outsiders will ultimately result in a damaged company reputation, lower levels of return
business, and lower long-term profits. Secondly, the company's initial commitment to dis-
honest practices will then start to generate a mismatch between the values of the company
and the values of honest employees. The mismatch will lead honest employees to leave the
company, or to suffer stress and increased absenteeism, resulting in higher employee costs.
Those employees who do not leave the company and who feel no stress, and so who do well
in and for the company, will be employees whose values match the dishonest values of the
company, i.e., dishonest employees. Over time the number of honest employees will decline
while the number of dishonest employees will rise, leading to an increase in levels of company
dishonesty. Thirdly, in order to cope with the rising levels of dishonesty, the company will
begin to implement auditing systems, inventory checks, and security systems. Company use
of such surveillance systems, however, will be read by employees as evidence of the com-
pany's lack of trust in them, which will in turn create an adversarial atmosphere and declining
levels of voluntary employee cooperation. In addition, the use of surveillance systems will
create a perception among employees that they are expected to perform well when under
surveillance, but to feel justified in cheating when the surveillance systems can be tricked or
escaped. And, finally, the use of surveillance systems will lead managers to believe that it is
these systems that cause employees to be honest and this belief will lead them to install more
and increasingly sophisticated systems. The use of ever more surveillance, however, will lead
to ever declining levels of trust and ever rising attempts to cheat the systems, which in turn
will motivate the use of additional surveillance. Gradually, then, the dishonesty initially
introduced in a limited department of the company, tends to spread to the entire organization,
pushing out the honest employees and multiplying the dishonest ones. See, Robert Cialdini,
"The Triple Tumor Structure of Organizational Dishonesty," paper presented at the "Confer-
ence on Behavioral Research and Business Ethics," Center for the Study of Ethical Issues in
Business, Kellog'Graduate School of Management, Northwestern University, Chicago, July
31, 1994.
16. Plato, the Republic, book two. The entire passage reads:

Let me ask you now: How would you arrange goods are there not some which we
welcome for their own sakes, and independently of their consequences, as, for example,
harmless pleasures and enjoyments, which delight us at the time, although nothing
follows from them?
I agree in thinking that there is such a class, I replied.
Is there not also a second class of goods, such as knowledge, sight, health, which are
desirable not only in themselves, but also for their results?
Certainly, I said.
And would you not recognize a third cleiss, such as gymnastic, and the care of the sick,
and the physician's art; also the various ways of money-making ^these do us good but
we regard them as disagreeable; and no one would choose them for their own sakes, but
only for the sake of some reward or result which flows from them?
There is, I said, this third class also. But why do you ask?
Because I want to know in which of the three classes you would place justice?
In the highest class, I replied, among those goods which he who would be happy
desires both for their own sake and for the sake of their results.
Then the many are of another mind; they think that justice is to be reckoned in the
troublesome class, among goods which are to be pursued for the sake of rewards and of
reputation, but in themselves are disagreeable and rather to be avoided.
I know, I said.
 WHY ETHICS MATTERS 219

17. G. C. Homans, Social Behavior: Its Elementary Forms (New York: Harcourt, Brace &
World, 1961).
18. J. S. Adams, 'Toward an Understanding of Inequity," Journal of Abnormal and Social
Psychology, vol. 67, (1963), "Inequity in Social Exchange," in L. Berkowitz (ed.). Advances
in Experimental Social Psychology, vol 2 (New York: Academic Press, 1965), pp. 267-99; J.
S. Adams & S. Freedman, "Equity Theory Revisited: Comments and Annotated Bibliography,"
in L Berkowitz & E. Walster, (eds.). Advances in Experimental Social Psychology, vol 9 (New
York: Academic Press, 1976), pp. 43-90.
19. Aristotle, Nicomachean Ethics, [c. 330 B.C.], translated by David Ross, (London: Oxford
University Press, 1966), p. 1131
20.1. R. Andrews, "Wage Inequity and Job Performance: An Experimental Study," Journal
of Applied Psychology, vol. 51, (1967), pp. 39-45; J. S. Adams & S. Freedman, "Equity Theory
Revisited: Comments and Annotated Bibliography," m L. Berkowitz & E. Walster (eds.).
Advances in Experimental Social Psychology, vol. 9, (New York: Academic Press, 1976), pp.
43-90; H. Garland, "The Effects of Piece-rate Underpayment and Overpayment on Job Per-
formance: A Test of Equity Theory with a New Induction Procedure," Journal of Applied Social
Psychology, vol. 3 (1973), pp. 325-334; J. Greenberg, "Approaching Equity and Avoiding
Inequity in Groups and Organizations," in J. Greenberg & R. L. Cohen (eds.). Equity and Justice
in Social Behavior (New York: Academic Press, 1982), pp. 389-435; R.D. Pritchard, M.D.
Dunnette, & D.O. Jorgenson, "Effects of Perceptions of Equity and Inequity on Worker
Performance and Satisfaction," Journal of Applied Psychology, vol. 56, (1972), pp. 75-94; R.
T. Mowday, "Equity Theory Predictions of Behavior in Organizations," in R. M. Steers & L.
W. Porter (eds.). Motivation and Work Behavior, 4th ed. (New York: McGraw-Hill, 1987), pp.
89-110.
21. E. Walster, E. Berscheid & G. W. Walster, "New Directions in Equity Research," Journal
of Personality arui Social Psychology, vol. 25 (1973), pp. 151-176; Elaine WaJster has also
written under the name Elaine Hatfield.
22. Walster, E., Walster, G. W. & Berscheid, E., Equity Theory and Research (Boston: AUyn
& Bacon. 1978), p. 6.
23. For a nice summary of the research on the extent to which people alter their perceptions
to make the world appear to them to be more just, see Melvin J. Lemer, The Belief in a Just
World (New York: Plenum Press, 1980).
24. M.K. Utne and R.F. Kidd, "Equity and Attribution," m Gerold Mikula (ed.). Justice and
Social Interaction (New York: Hans Huber Publishers, 1980), pp. 63-94.
25. S. Schwartz, "Normative Influences on Altruism," in L. Berkowitz (ed). Advances in
Experimental Social Psychology, vol 10 (New York: Academic Press, 1977), pp. 221-79; W.
Austin and B. Hatfield, "Equity Theory, Power, and Social Justice," in G. Mikula, (ed.). Justice
and Social Interaction (New York: Springer-Verlag). pp. 25-61.
26. M. Deutsch, "Equity, Equality, and Need. What Determines Which Value Will Be Used
as the Basis of Distributive Justice?" Journal of Social Issues, vol. 31 (1975). pp. 137-49, Q.S.
Leventhal, 'The Distribution of Rewards and Resources in Groups and Organizations," in L.
Berkowitz & E. Walster, (eds). Advances in Experimental Sociai Psychology, vol. 9 (New York:
Academic Press, 1976), pp. 92-131. E. E. Sampson, "On Justice as Equality," Journal of Social
Issues, vol. 31 (1975), pp. 45-64.
27. M. Deutsch, Ibid., T. Schwinger, "Just Allocations of Goods: Decisions .Among Three
Principles," in Gerold Mikula, ed.. Justice and Social Interaction (New York: Springer-Verlag
New York, Inc., 1980), pp. 95-125; Gerold Mikula. "On the Role of Justice in Allocation
Decisions," in ibid., pp. 127-66
220 BUSINESS ETHICS QUARTERLY

28. Deutsch, 1975; Sampson, 1975.Leventhal, 1976; Morton Deutsch, "Egalitarianism m

the Laboratory and at Work," in Melvin J. Lemer and Riel Vermunt, (eds.). Social Justice In
Human Relations, vol. 1 (New York: Plenum Publishing Corporation, 1991), pp. 195-209.
29. E.E. Sampson, "Studies of Status Congruence," in L. Berkowitz, (ed.). Advances in
Experimental Social Psychology, vol. 4 (New York:Academic Press, 1969), pp. 225-70.
30. M.S. Greenberg & S.P. Shapiro, "Indebtedness: An Adverse Aspect of Asking for and
Receiving Help," Sociometry, vol. 34 (1971), pp. 290-301; D. Krebs, "AltruismAn Exami-
nation of the Concept and a Review of the Literature," Psychological Bulletin, vol. 73 (1970),
pp. 258-302.
31. This is a tricky issue. Equity theory is based on exchange theory, and some models hold,
as I indicated earlier, that when people perceive injustice, they experience distress, and they
act to remove the injustice in order to remove the source of distress. Such models imply that
self-interest moves people to avoid injustice and seek justice. Other models of distributive
justice hold that people seek seek distributive justice in their exchanges with others because
they are trying to balance their desire for personal gam, against the risk of provoking conflict
by taking too much. Again, such models imply that justice is valued only instrinsically. There
is perhaps no way to definitively disprove such models since to some extent the egoist
assumptions built into them are nonfalsifiable. What is possible, and what I attempt to do in
what follows, is show that there is a good deal of evidence that suggests that distributive justice
is not desired only for its instrumental value. This research provides evidence that is difficult
to account for within the egoist models. But, with enough manipulation, it is possible to force
the data to fit into the egoist models.
32. T. Tyler & R. M. Dawes, "Fairness in Groups: Comparing the Self-interest and Social
Identity Perspectives," in B. A. Mellers & J. Baron, (eds.). Psychological Perspectives on
Justice (New York: Cambridge University Press, 1993), pp. 87-108; G.S. Leventhal & D. W.
Lane, "Sex, Age, and Equity Behavior," Journal of Personality and Social Psychology, vol. 15
(1970), pp. 312-16; G. Mikula & T. Schwinger, "Intermember Relations and Reward Alloca-
tion," m H. Brandstatter, J. H. Davis, & H. Schuler, (eds.). Dynamics of Group Decisions
(Beverly Hills: Sage, 1978), pp. 229-50; E. G. Shapiro, "The Effect of Expectations of Future
Interaction in Reward Allocations in Dyads: Equity or Equality," Journal of Personality and
Social Psychology, vol. 31 (1975), pp. 873-80; T. Schwinger, "Just Allocations of Goods:
Decisions Among Three Principles," in Gerold Mikula, (ed.). Justice and Social Interaction
(New York: Springer-Verlag, 1980), pp. 95-125
33. W. Guth, R. Schmittberger, and B. Schwarze, "An Experimental Analysis of Ultimatum
Bargaining," Journal of Economic Behavior in Organizations, vol. 3, pp. 367-88; see also
Daniel Kahneman, J. L. Knetsch, R. H. Thaler, "Fairness and the Assumptions of Economics,"
Journal of Business, vol. 59, no. 4 (1986), pp. S284-S300.
34. J. Ochs, and A. E. Roth, "An Experimental Study of Sequential Bargaining," American
Economic Review, vol. 79, pp. 335-85.
35. J. W. Minton, J. W, Justice, Satisfaction, and Loyalty: Employee Withdrawal and Voice
in the Din of Inequity, unpublished doctoral dissertation. Duke University, Durham, NC, 1988.
36. J. Brockner, T. Tyler, & R. Schneider, "The Higher They Are, The Harder They Fall:
The Effect of Prior Commitment and Procedural Injustice on Subsequent Commitment to Social
Institutions," paper presented at the annual Academy of Management meeting, Miami Beach
FL (1991, August); D. Kahneman, J.L. Knetsch, and R. Thaler, "Fairness as a Constraint on
Profit Seeking: Entitlements in the Market," American Economic Review, vol 76, (1986), pp.
728-41; R.J. Bies, T M. Tripp, and M. A. Neale, "Procedural Fairness and Profit Seeking: The
Perceived Legitimacy of Market Exploitation," Journal of Behavior in Decision Making.
 WHY ETHICS MATTERS 221

37. Plato, Republic, book two, Jowett translation. Again, it is worth quoting the entire
passage:
[Socrates:] And would you tell me, whether you think that a state, or an army, or a band
of robbers and thieves, or any other gang of evil-doers could act at all if they injured one
another'^
[Thrasymachus:] No indeed..., they could not.
[Socrates:] But if they abstained from injuring one another, then they might act together
better?
[Thrasymachus:] Yes.
[Socrates:] And this is because injustice creates divisions and hatreds and fighting, and
justice imparts harmony and friendship; is not that true, Thrasymachus?
[Thrasymachus:] I agree,... because I do not wish to quarrel with you.
[Socrates:] How good of you,..; but I should like to know also whether injustice, having
this tendency to arouse hatred, wherever existing, among slaves or among freemen, will
not make them hate one another and set them at variance and render them incapable of
common action?
[Thrasymachus:] Certainly.
38. J. Thibaut & Walker, Procedural Justice: A Psychological Analysis (Hillsdale, NJ:
Lawrence Erlbaum Associates, 1975); Thibaut and Walker's book was the seminil study in the
field of research on procedural justice
39. Robert Folger & M. A. Konovsky, "Effects of Procedural and Disuributive Justice on
Reactions to Pay Raise Decisions." Academy of Management Journal, vol. 32, (1989), pp.
115-130.
40. L. Walker, E.A. Lmd, and J. Thibaut, "The Relation Between Procedural Justice and
Distributive Justice," Virginia Law Review, vol. 65 (1979), pp. 1401-1420.
41. For reviews of this research see E.A. Lind & T. Tyler, The Social Psychology of
Procedural Justice (New York: Plenum, 1988); T. R. TVIer, "Procedural Justice Research,"
Social Justice Research, vol. 1, (1987), pp. 41-66: and T. R. Tyler, "What Is Procedural Justice?"
Law and Society Review, vol. 22, (1988), pp. 301-35. For studies of procedural justice in citizen
encounters with police officers see T. R. Tyler & R. Folger, "Distributional and Procedural
Aspects of Satisfaction with Citizen-Police Encounters," Bane and Applied Social Psychology,
vol. 1, (1980), pp. 281-92 and T. R. Tyler, Why People Follow the Law: Procedural Justice,
Legitimacy, and Compliance (New Haven, CT: Yale University Press, 1990); for studies of
procedural justice in student-teacher relations see T. R. Tyler & A. Caine, "The Influence of
Outcomes and Procedures on Satisfaction with Formal Leaders," Journal of Personality and
Social Psychology, vol. 41 (1981), pp. 643-55; for studies of procedural justice in politics see
T. R. Tyler, K. Rasinski, & K. McGraw, "The Influence of Perceived Injustice on Support for
Political Authodties," Journal of Applied Social Psychology, vol. 15 (1985), pp. 700-25.
42. J. Greenberg, "Organizational Performance Appraisal Procedures. What Makes Them
Fair?" m R. J. Lewicki, B. H. Sheppard & M. H Bazerman, (eds). Research on Negotiation in
Organizations, vol. 1 (Greenwich, CT: JAI Press, 1986), pp. 25-41.
43 E. Barrett-Howard & T. lyier, "Procedural Justice as a Criterion in Allocation Decisions,"
Journal of Personality and Sociai Psychology, vol. 50, (1986), pp. 296-304; Folger and
Konovsky, "Effects of Procedural and Distributive Justice on Reactions to Pay Raise Decisions."
44 G. S. Leventhal, "What Should be Done with Equity Theory?" in K. J. Gergen, M. S.
Greenberg, and R. H. Willis, eds.. Social Exchange: Advances in Theory and Research, (New
York: Plenum. 1980), pp. 27-55. and G. S. Leventhal, J. Kamza, and W R Fry, "Beyond
222 BUSINESS ETHICS QUARTERLY

Fairness: ATheoiy of Allocation Preferences," in G. Mikula, ed., Justice and Social Interaction
(NewYork: Springer-Verlag, 1980), pp. 167-218.
45. R. Folger, & M. A. Konovsky, "Effects of Procedural and Distributive Justice on
Reactions to Pay Raise Decisions"; S. Alexander & M. Ruderman, "The Role of Procedural
and Distributive Justice in Organizational Behavior," Social Justice Research, vol. 1, (1987),
pp. 177-98; see also Tyler, T. R., "Justice and Leadership Endorsement," in R.R. Lau & D.O.
Sears, eds.. Political Cognition (Hillsdale, NJ: Erlbaum, 1986), pp. 257-78.
46. T. R. Tyler and A. Caine, 'The Influence of Outcomes and Procedures on Satisfaction
with Formal Leaders," Journal of Personality and Social Psychology, vol. 41 (1981), pp.
462-655; T. R. Tyler, K. Rasinski, and K. McGraw, "The Influence of Perceived Injustice on
the Endorsement of Political Leaders," Journal of Applied Social Psychology, vol. 15 (1985),
pp. 700-25; T. R. Tyler and E. A. Lind, "A Relational Model of Authority in Groups," in M.
Zanna, ed.. Advances in Experimental Social Psychology, vol. 25 (New York: Academic Press,
1992); J. Greenberg, "Cultivating an Image of Justice: Looking Fair on the Job," Academy of
Management Executive, vol. 2 (1988), pp. 155-58; D. W. Organ, Organizjational Citizenship
Behavior: the Good Soldier Syndrome (Lexington, MA.: Lexington Books, 1988)
47. C.E. Miller, P. Jackson, J. Mueller, & C. Schershing, "Some Social Psychological Effects
of Group Decision Rules," Journal of Personality and Social Psychology, vol. 52, (1987), pp.
325-32; Tyler and Dawes, "Fairness in Groups: Comparing the Self-interest and Social Identity
Perspectives."
48. Robert Folger and Mary A. Konovsky, "Effects of Procedural and Distributive Justice
on Reactions to Pay and Raise Decisions," Academy of Management Journal, vol. 32, no. \,
(1989), pp. 115-30; Tom Tyler, K. Rasinski, and N. Spodick, "The Influence of Voice on
Satisfaction with Leaders: Exploring the Meaning of Process Control," Journal of Personality
and Social Psychology, vol. 48, (1985), pp. 72-81.
49. E. A. Lind, R. Kanfer, P.C. Earley, "Voice, Control, and Procedural Justice: Instrumental
and Noninstmmental Concerns in Fairness Judgments," Journal of Personality and Social
Psychology, (1990), vol. 59, no. 5, pp. 952-59.
50. R. E. Lane, "Procedural Goods in a Democracy: How One is Treated Versus What One
Gets," Social Justice Research, (1988), vol. 2, pp. 177-192; E. A. Lind and T. R. Tyler, The
Social Psychology of Procedural Justice (New York: Plenum Press, 1988), pp. 230-40; see also,
Folger and Konovsky, "Effects of Procedural and Distributive Justice on Reactions to Pay and
Raise Decisions."
51. S. Strasser, J.D. Eveland, G. Cummings, O.L. Deniston, and J.H. Romani, "Conceptual-
izing the Goal and System Models of Organizational Effectiveness," Journal of Management
Studies (July 1981); and K. Cameron, "Critical Questions in Assessing Organizational Effec-
tiveness," Organizational Dynamics, (Fall 1980). It should be noted, however, that the concept
of organizational effectiveness has had its critics See J. P. Campbell, "On the Nature of
Organizational Effectiveness," m P.S. Goodman and J. M. Pennings, eds.. New Perspectives
on Organizational Effectiveness (San Francisco: Jossey-Bass, 1977).
52. Companies, for example, that have a strategic commitment to just treatment of their
employees and customers seem to have these qualities. An excellent example is Lincoln
Electric Company. See Arthur D. Sharplin, "Lincoln Electric Company, 1989," in David W.
Grigsby and Michael J. Stahl, Strategic Management Cases (Belmont, CA: Wadsworth, Inc.,
1993), pp. 226-50.

1996. Business Ethics Quarterly, Volume 6, Issue 2. ISSN 1052-150X. 0201-0222.