Why Ethics Matters

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, andthat this is particularly true for business organizations. The research onprisoners' dilemmas and social dilemmas shows that ethical behavior ismore profitable and more rational than unethical behavior in terms ofboth the negative sanctions on unethical behavior when interactionswith stakeholders are iterated, and the positive rewards of habituallyethical behavior when stakeholders can identify those who are predis-posed to be ethical. In addition, the psychological research on justiceshows that justice is intrinsically valued, both from an outcome and froma process perspective, and so crucial for business organizations, particu-larly in terms of organizational effectiveness.

In 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 andStevenson are not the first to suggest that unethical behavior may be moreprofitable than ethical behavior. Over two thousand years ago, exactly thesame claim was made by Thrasymachus, a character in Plato's Republic whoconcluded that while justice is for the simpleton, injustice is for the wise:

[Socrates:] Well, then, Thrasymachus... suppose you begin at thebeginning and answer me. You say that being perfectlyunjust 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 showthat Thrasymachus is wrong, that injustice is neither more profitable nor morerational 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 thereaders of the Harvard Business Review might not be up to plowing throughtables of numbers and statistics. Instead, what they provide are anecdotes andsnippets of conversations taken, apparently, from their interviews with a varietyof business people. These business people describe incidents where dishonestyor broken promises paid off and several are quoted as saying that many busi-nesses "cavalierly break promises" yet suffer no sanctions. What Bhide andStevenson's interviews clearly demonstrate is that many business people feelthat unethical behavior in business often pays off.

But it is difficult to see what more we are supposed to leam from these storiesand quotations since they seem to tell us what we already knew: that wrongdoingsometimes 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 tounethical 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 abusiness organization or business person, has to gain from just behavior or isinjustice truly more profitable? Like Bhide and Stevenson, however, I willaddress this question by appealing to some very unPlatonic empirical data.Plato, as is well known, had a profound distrust for empirical evidence. In whatfollows I will set aside this Platonic distrust for the empirical and base much ofwhat I say on empirical research findings. A major aim of this essay is to callattention to this empirical research and to suggest its relevance and importanceto 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 saysomething about why the question arises and why, as Bhide and Stevenson'sinterviews show, so many business people feel that ethics is for suckers. Phi-losophers—Immanuel Kant, for example—have often divided moral norms intotwo groups: those that impose duties toward others and those that impose dutiestoward 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. Normsthat impose duties toward the self are often justified in terms of the future orlong-term benefits they confer on the self and so it is fairly easy to explain to aperson 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 whobehaves temperately is more likely to avoid being controlled by her passions andappetites 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 destroypeace and harmony. Self-regarding norms, then, are justified because obedienceto 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 arebenefits that matter to us.

Other-regarding norms, however, are not so easily justified and so it is not soobvious 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 isrelated to our neighbor; for it does what is advantageous to another [and] Justicein this sense, then, is not part of virtue but virtue entire."^ Other regardingnorms, then, which impose duties toward others, raise what is perhaps the classicquestion of ethics: why be moral? Why should a person take an interest injustice 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 ownersthrough 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; andthe economic institutions of industrialized nations are built on the idea thatbusiness behavior is self-interested. Why then should business organizations ortheir 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-interestedprofit-optimizing behavior is legitimized by ideology, by law, and by econom-ics, why should business organizations pursue ethical norms that advance theinterests 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 willdo 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 theorganization and the individual that are akin to the benefits that Plato attributedto justice. Moreover, I will argue, these benefits are benefits that matter greatlyto profit-oriented self-interested economic agents.

I will begin by looking at what are now called 'Prisoners Dilemmas" or, moregenerally, social dilemmas, a topic that has been intensely researched in recentyears, although it has been a topic of discussion by ethicists for hundreds ofyears.^ I will then turn to recent investigations into responses to injustice, alsoa topic that has been subjected to a fluiTy of recent research although long astandard topic of interest to moral philosophers.

Research on Prisoners Dilemmas

In a crucial passage in the Republic, one of Plato's characters suggests thatnorms of justice can be thought of as the outcome of a cooperative agreementamong people. In a society that lacks norms of justice, he suggests, peopleinflict injustices on each other. People quickly conclude that they will be better


off if everyone adheres to norms of justice. People consequently agree to coop-erate in mutual adherence to norms of justice. However, each individual knowsthat he would be better off if he personally defected from following the normsthat everyone else is following, "For no man who is worthy to be called a manwould ever submit to such an agreement if he were able to resist; he would bemad if he did."'

In this account, justice is characterized as creating the kind of situation thatcontemporary game theory calls a "prisoners dilemma."* Prisoner's dilemmasare 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. Ifboth cooperate, they will both gain some benefit. If both defect, neither gets thebenefit. If one cooperates while the other defects, the one who cooperates suffersa 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 illustratethe kind of situation it represents. The story goes like this: Two thieves arrestedfor a crime vow not to betray each other. But the police put them in separaterooms, and tell each thief the same thing: "If your partner confesses and youkeep silent, he goes free and you get 5 years in prison; if you confess and hekeeps silent, you go free and he gets 5 years in prison. If you both confess, thenyou both get 3 years in prison. If you both keep silent, then we'll give you each1 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, asearly 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: "Theother party will either cooperate or defect. If the other party cooperates, I willgain more by defecting than by cooperating; and, if the other party defects, I willalso gain more by defecting than by cooperating. In either case, I will be betteroff 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'sdilemmas, in short, are situations in which the self-interested behavior of twoparties leaves both worse off than cooperative behavior would.


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 withrespect 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. Buteach member knows that if the others stick to the agreement, he has more to gainby selling the commodity at a lower price, while if the others do not stick to theagreement, he will also be better off selling at a lower price. Since all willreason this way, the cartel breaks down, prices fall, and all the members of thecartel end up worse off than if they had cooperated in the agreement. Studieshave indicated that large groups in a social dilemma are rarely able to securecooperation, especially if they expect not to interact frequently, ̂ o

Prisoners dilemmas, in the form of social dilemmas, mirror many of the kindsof social situations with which our lives are filled, i.e., situations in whichseveral people have a choice between cooperation or non-cooperation and inwhich the self-interested pursuit of non-cooperation leaves all worst off thancooperation. In addition to cartels, such situations include contracts and agree-ments or promises, honor systems, market competition, military arms races, thegame of chicken, the provision of public goods, the "NIMBY' ("Not In My BackYard") syndrome, the consumption of unowned resources, the free rider phe-nomenon, and, of course, ethics. Ethical norms can be interpreted as norms thatput us in a prisoners' dilemma situation. For example, when two individuals talkwith each other, they have a choice of cooperating in the norm of telling thetruth, 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 inthe norm of keeping their word, or they can try to take advantage of each otherby breaking the agreement. When individuals who each own a piece of propertyinteract, they have a choice of cooperating in the norm against theft, or they cantry to take advantage of each other by stealing each other's property. Beingethical, then, can be thought of as a kind of cooperation between individuals: itis cooperating in the moral norms that sustain our fundamental institutions suchas 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 takeadvantage of others by breaking the moral norms that others are following.

Seeing ethics in terms of the prisoner's dilemma suggests an explanation fortwo common observations business people make about ethics. First, businesspeople often acknowledge that the business world would be a better place ifeveryone behaved ethically. This is what the prisoner's dilemma analysis ofethics would suggest since mutual cooperation in the norms of ethics is mutuallybeneficial; in particular we all gain the benefit of stable social institutions andan orderly and flourishing society if everyone cooperates in the moral norms thatsustain these. But, secondly, business people just as often suggest, as Plato'sThrasymachus did, that ethical behavior in business is for suckers. And this.


again, is what the prisoner's dilemma suggests since the person who sticks toethics will lose out when she encounters a person who takes advantage ofher bybeing unethical. The ethical person, then, is in a prisoner's dilemma and soappears 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 thatwhen individuals deal with each other in a prisoners dilemma situation, it is ineach person's individual interest not to cooperate but to try to take advantage ofthe cooperation of the other party. Why, then, are people ever ethical? If, asThrasymachus suggests, injustice pays off, why are people ever just? The Pris-oner's Dilemma analysis raises in very stark form the question with which webegan: why be ethical if getting away with being unethical pays better than beingethical?

Part of the explanation for why ethics matters lies in an unreal assumption wehave so far been making. We have assumed that the people who meet in aprisoners dilemma interact with each other only once. In fact, as the prisonersdilemma 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 theperson who took advantage of her. This is perhaps the reason why ostensiblyunethical behavior emerges in those exchanges in which parties interact onlyonce, such as in the sale of cars or other big-ticket items, or exchanges in whichthe parties cannot identify each other, such as in freeway driving.

However, the situation is quite different when interactions are iterated and arebetween individuals who are known to each other; for example, when individu-als have to deal with each other repeatedly or have on-going relationships witheach other. When individuals can identify each other and have to deal with eachother in repeated prisoner's dilemma situations, those who continue to try to takeadvantage of the other party can be made to suffer sustained losses, while thosewho 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 otherrepeatedly, of course, is that when one party takes advantage of the other in oneinteraction, the injured party remembers this and can retaliate by doing the samein the next interaction. Through mutual retaliation, the parties can enforcecooperation, 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 strategy—called TIT FOR TAT— is for a party to cooperate initiallybut to retaliate with non-cooperation each subsequent time the other party failsto 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 eachother than to fail to cooperate. And cooperation, of course, brings with it themutual advantages of mutually beneficial activities. Thus, where individualshave to deal with each other repeatedly, and where the threat of retaliation ispresent, it is better to cooperate with the other party than to try to take advantageof them.


The implications of the prisoners' dilemmas research for ethics in business arefairly clear. Business interactions with its stakeholders—employees, custom-ers, suppliers, creditors, and stockholders—are usually repetitive and on-go-ing.'^ Consequently, if a business attempts through unethical behavior to takeadvantage of these or other stakeholders in today's interaction, they can usuallyfind some way to retaliate against the business in tomorrow's interaction. Theretaliation can consist of as simple an act as refusing to buy from, work for, ordo business with the unethical party; or it may be a more complex form ofretaliation such as sabotage, absenteeism, pilferage, organizing boycotts or otherforms of getting others to refuse to do business with the unethical party, orgetting even by inflicting other kinds of covert or overt injuries. Simply put, itis shortsighted for management to try to take advantage of these groups throughunethical behavior. It is possible for a business to sometimes get away withunethical behavior, but in the long run, if interactions between identifiableparties are iterated and retaliation is a realistic option, unethical business behav-ior tends to he unprofitable and non-rational, while, ethical behavior will reapthe rewards of mutual cooperation.

Although the threat of retaliation in repeated interactions goes some waytoward explaining why ethics matters in business, still the explanation does nottake 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 thatethics is preferable because unethical behavior is punished. This provides anegative incentive for avoiding unethical behavior, but does not show that ethi-cal behavior is itself an attractive option. A more satisfying justification ofethics 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 thatethical behavior was not merely a lesser evil, to be preferred over the greaterevils 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 thework of the economist Robert Frank, Frank's research, like the prisoners' di-lemma research, looks at situations in which people have a choice betweencooperating with or taking advantage of others.^^ Frank's analysis, however, isaimed at investigating whether it is better for a person to habitually cooperatewith others or to habitually take advantage of others, when that person is livingin a population of people some of whom habitually cooperate and some of whomhabitually take advantage of others. Since, as I have argued, ethics is a kind ofcooperation in the rules that support our fundamental social institutions, thequestion comes down to this: is it better to be habitually ethical or unethical ina 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 ishabitually 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-


havior. First, he found that people send fairly reliable signals to each otherregarding whether they habitually cooperate in keeping to rules and agreements,or whether they habitually attempt to take advantage of others. Signals of one'spredisposition to be cooperative include visual cues such as facial expressions,auditory cues such as tone of voice, and past history such as is embodied inreports from others and in reputation. Frank's studies showed that people canaccurately identify cooperative predispositions about 75 percent ofthe time, andcan accurately identify non-cooperative predispositions about 60 percent of thetime.

Secondly, Frank's studies showed that when people interact with each otherand can choose the persons with whom they interact, they more often choose tointeract with those whom they believe habitually cooperate in the rules of ethicsand 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 factors—the ability to identify ethical and unethi-cal predispositions, and the tendency to seek out those who are ethical and avoidthose who are unethical—imply that it is more advantageous to be habituallyethical than unethical. Because ethical people seek each other out and avoidunethical people, they will tend to increase the frequency of their dealings witheach other. Ethical people will therefore increase the frequency with which theyengage in mutually cooperative and thus mutually beneficial exchanges. On theother hand, unethical people will be avoided by ethical people and so they willbe forced to deal with other unethical people. As a result, unethical people willtend to increase the frequency of their dealings with each other, and in thesedealings each will try to take advantage of the other in a mutually destructiveexchange. Frank's conclusion is that habitually ethical people will more oftenhave 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 habituallyethical people end up with larger gains than habitually unethical people.

Frank's research has clear implications for ethics in business. His findingsimply that employees, for example, have fairly reliable ways of discoveringwhether a manager or even a team of managers is habitually ethical or unethical.His research implies, further, that given the choice ethical employees will tendto seek to deal more with those whom they identify as ethical than with thosewho are unethical: that is, ethical employees will tend not to enter or to exitorganizations when they learn those organizations are staffed by managers whodeal unethically with their employees, and they will tend to enter and remainloyal to organizations staffed by ethical managers. Unethical managers, on theother hand, will be left with the unethical remainder. Consequently, over thelong run and for the most part, ethical managers will tend to have mutuallycooperative interactions with ethically reliable employees and together withthem will create mutually beneficial corporate enterprises, while unethical man-agers will more often tend to find themselves in mutually destructive interac-


tions with unethical employees and together with them create dysfunctionalenterprises.'5 Habitually ethical management is more advantageous over thelong run, than habitually unethical management.

The prisoners' dilemma research is thus fairly supportive of the Platonic viewthat 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 withwhich managers will find themselves in mutually beneficial interactions withethical 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, particularlywould find them unpalatable. The research we have reviewed so far suggeststhat over the long run unethical behavior in iterated exchanges tends to bepunished and ethical behavior tends to be rewarded. So ethics is here beingmotivated by external rewards and punishments. The prisoners dilemma re-search takes an instrumental view of ethics; ethics is to be pursued because ofits instrumental value in securing other goods and avoiding other evils. In thisapproach, ethics is not desired for itself, but for its accompaniments. But Platohad 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 notbecause 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 currentresearch on ethics. This is the psychological research on how people respond tojustice and injustice. This research, I believe, suggests a view of ethics—or atleast of that portion of ethics that we refer to as "justice"—that is more inkeeping with the view of Plato. Plato, as I noted, rejects the instrumentalconception 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 ofGeorge C. Homans'' which J. S. Adams'* adapted for his research on howworkers respond to unfairness in the work place, in particular to inequity incompensation, a form of distributive justice. (Distributive justice refers to thefairness of the way in which benefits and burdens are distributed among themembers 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


or she is being paid less than others for a comparable amount of work, or if theworker believes he or she is being paid more than others for a comparableamount of work, the worker will regard the situation as unjust and will take stepsto reestablish justice. Interestingly, this definition of justice is exactly the samedefinition that Aristotle proposed several centuries earlier. ̂ ^

Adam's own studies and those of other researchers strongly supported hishypothesis.̂ *^ Workers do in fact compare the proportion between the pay theyreceive and the work they do to the proportion hetween the pay and work ofother similar workers, and they take steps to change things when they believetheir compensation is unjust. In particular, workers who believe they unjustlyare being paid more than others will feel guilty and will work harder, whileworkers who believe they unjustly are being paid less than others will feel angryand will lower their performance or take other action such as complaining tosupervisors, sabotage, or finding another job. Distributive justice matters toworkers.

Adam's theory was generalized and extended beyond work situations to applyto all social interactions by Elaine Walster and her associates.^' Walster theo-rized that societies evolve norms of justice and induce their members to acceptand follow these norms. Societies generally reward their members when theytreat others justly, and punish those who treat others unjustly. Individuals whoare treated unjustly or who see others being treated unjustly, will become dis-tressed and they will attempt to eliminate their distress by engaging in actionsaimed at restoring justice.^^ Like Adams, Walster defined justice as obtainingwhen the proportion perceived to obtain between a person's contribution to agroup and her rewards from the group equals the proportion perceived to obtainbetween other people's contributions and their rewards.

In a series of studies Walster and her associates found plentiful evidencesupporting her view that individuals in all social situations will react to injusticewith distress and will attempt to eliminate their distress by restoring justice.Walster emphasized, however, that individuals may attempt to relieve theirdistress either by altering the actual situation, or by altering their perception ofthe situation. If it is called to a worker's attention, for example, that he or shegets less pay than others for working the same hours they do, the worker mayattempt to alter his or her situation by demanding more pay. However, if theworker is not in a position to do anything about the situation, the worker mayinstead respond by deciding that in spite of appearances the other workers arereally contributing more than he or she, perhaps because they must be workingharder or because their work is of a higher quality. In short, when peopleperceive 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 bemore just.^^

Further psychological research on distributive justice amended Walster's find-ings in two important directions. First, researchers found that under certainconditions people respond to injustice by neither changing their situation nor by


changing their perceptions hut hy doing nothing. In particular, people willrespond 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 theyhelieve they are personally responsihle for the injustice, hy their ahility tocorrect the injustice, and hy the costs of acting to remedy the situation.^^

Secondly, and more importantly for our purposes, researchers found that theprinciple of proportionality is not the only principle of distrihutive justice thathuman heings recognize and emhrace. Researchers have found three mainnorms of justice to which people respond: (1) The principle of proportionalityor "equity" that says that rewards are just when they are proportional to eachindividual's contdhution—the 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 givenequal rewards; (3) the need principle which says that rewards are just whenallocated according to individual need.^^ Studies hy M. Deutsch, T. Schwinger,and others indicate that people see the principle of contrihution as appropriatewhen they are working in groups where relationships are impersonal and com-petitive or where goods are produced hy independent work as in pieceworkjohs.2'' Interestingly, use of the principle of proportional justice to allocaterewards in organizations tends to promote an even more competitive atmospherein 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 theprinciple of equality when working in groups that exhihit solidarity and wheretasks require cooperation. And, again interestingly, use of the equality principlein groups tends to increase solidarity and harmony among group memhers andto enhance cooperative activities.'^ Finally, people tend to recognize the prin-ciple of need when working in groups whose memhers exhihit high levels ofinterpersonal attraction and the shared goal of promoting each other's welfare.Although use of the need principle may enhance a group's emotional honds, itis also possihle that memhers who are given goods hecause of their need maysee this as humiliating and so avoid it.'^

The research on distributive justice ohviously shows that justice matters topeople and that people are motivated powerfully hy specific forms of distrihu-tive justice in specific contexts. But does the research support Plato's view thatjustice is desired for itself?^' A numher of studies examining the conditionsunder which the various principles of justice are favored, suggest that even whenworkers will get less compensation by insisting on adherence to a particularprinciple of distributive justice, they still demand adherence to that principle ifthey feel it is appropriate for their situation.^^ Less productive workers, forexample, working at competitive tasks for which proportional justice would hethe appropriate standard of compensation, will demand proportional justice eventhough this means they personally will get paid less than if they demandedjustice of equality. And highly productive workers in cooperative tasks for


which an equal distribution of rewards would be appropriate will demand justiceof equality even when this means they will get paid less than if they demandedproportional justice. These studies suggest that workers see adherence to theappropriate principle of distributive justice as intrinsically desirable entirelyapart from the personal advantages (or disadvantages) of that form of distributivejustice (although personal advantage always remains a competing motivator).

A similar conclusion is indicated by studies of the extent to which people willchoose justice over self-advantage. In one set of experiments two subjects aregratuitously given a sum of money to divide between themselves.^^ The firstsubject decides how the money will be divided between the two without anyinput from the second subject, who, however, gets to decide whether the two willget the money at all. Since neither person has done anything to merit a largershare of the money, the appropriate principle of distributive justice is that ofequality. And, in fact, in most experiments the first subject tended to divide themoney more or less equally, suggesting a desire for distributive justice thatoutweighed the desire to take a much bigger share. Moreover, when the divisionof money was extremely unequal, the second subject usually rejected the offereven though this meant foregoing whatever money they would have received.Thus, distributive justice matters a great deal to people, and a large proportioneven will forego gains to themselves for the sake of justice. In an even moreconvincing experiment, the second person was given no choice in the matter atall, so that the first person both determined the division of money and decidedwhether to take the money.̂ * Surprisingly, although the subjects making thedivision 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 foregopersonal 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 thisdesire is a powerful motivating force, often, but not always, even overridingpersonal advantage. This conclusion has important implications for profit-ori-ented business organizations, particularly insofar as the research shows thatpeople's desire for justice will motivate them to take steps to ensure that justiceprevails, even when this means foregoing advantages to themselves. It mustmatter to businesses, for example, that employees seek distributive justice incompensation and work assignments, and will take steps to ensure that workburdens are justly proportionate to compensation. In particular, if employeesbelieve 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 byputting forth less effort, perhaps by taking days off from work, or perhaps byotherwise lowering their productivity.^^ People outside a business will alsoreact negatively to violations of distributive justice in ways that must matter toa business. Customers, for example, will turn against a company if they believethat it is unjustly charging more than it should for a product, as may happen, forexample, when an essential commodity is in very short supply.̂ ^ Finally, it must


matter to business that task performance is affected by the kind of distributivejustice that prevails in an organization; compensation systems based on theprinciple of contribution create a competitive atmosphere in which resourcesand 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 theemployees, 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 wouldhave 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'sdeepest 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 groupthat is itself intrinsically desirable. As he puts it early in the Republic: "injusticecreates divisions and hatreds and fighting, and justice imparts harmony andfriendship."^^ Does contemporary psychological research on justice support theview that justice is intrinsically desirable because it is constitutive of a harmonyand order that is intrinsically desirable?

To answer this question, I want to turn to examine one final direction in whichthe research on justice has expanded. The early research on justice that we justexamined (by Adams, Walster, and others) focused on the fairness of outcomesand 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 proceduresof allocation and distribution, such as grievance procedures, courtroom prac-tices, evaluations of students, employee performance evaluation, the methods bywhich wages are set, the processes through which people are hired, fired, andpromoted, the processes through which organizational decisions are made, andmore generally, any decision-making process that results in the allocation ofbenefits or burdens. Do these studies of procedural justice shed any additionallight on the intrinsic desirability of justice in business organizations?

The first studies on procedural justice found that dispute resolution processesin which the parties to a dispute are allowed to provide their own input into theprocess 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 madethrough processes that allowed for direct input, the decisions that emerged fromthe process were embraced and accepted as legitimate by the affected parties, toan extent not present when exactly the same decisions were made throughprocesses that did not allow such input."̂ " Moreover, subsequent studies in avariety of social contexts showed that decision-making processes and institu-tions that allow affected parties direct mput into the process, are judged to bemore just than those which don't, and that such just processes and institutions.


as well as the decisions reached through them are more likely to be accepted byaffected parties, more likely to be seen as legitimate by the parties involved, andmore likely to be complied with by the parties involved.'*' Studies of workers,for example, have shown that when a system of employee evaluation allowsworkers 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 morelikely to be satisfied with the process and more acceptant of their final evalu-ations regardless of whether the evaluations are low or high."*̂ Other studieshave shown that employee evaluation systems are also judged as fair and valuedwhen 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 thefairness of procedures is further determined by the extent to which they provide:adequate methods of selecting decision-makers, adequate procedures for settingand communicating the ground rules that will determine rewards, suitable meth-ods of gathering and communicating the information on the hasis of which therules are applied, suitable decision-making mechanisms in the application ofrules, 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 toprocesses that are just. One set of studies showed that when employees feel thatan organization's decision-making processes are just they exhibit lower levelsof turnover and absenteeism, and higher levels of trust and commitment to theorganization 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 morewilling to see their leadership as legitimate."*^ In short, employees becomecommitted to the just organization and remain loyal to it and willing to acceptand follow its leaders. On the other hand, employees are repelled by the unjustorganization 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, arevalued 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 ispossible that people value just processes because at some level they believe thatjust processes are likely to provide them with larger rewards than unjust ones.Nevertheless, there are some studies that indicate that people place some valueon just procedures that is independent of the extent to which such procedurespersonally benefit them."*' Although certain studies have shown that just proce-dures have instrumental value for their participants, these same studies havedemonstrated that just procedures are also imbued with noninstrumental or


intrinsic value."** For example, in one study, two groups of workers were bothallowed to say what they thought would be an appropriate amount of work toperform in a given time.'*' But while the amount of work for one group wasadjusted in accordance with their input, the other group was told that althoughtheir input was being solicited, the amount of work they had to do had alreadybeen decided and their input would have no effect on the amount of work theywould be asked to perform. A third, control group, was not allowed even to saywhat they thought would be an appropriate amount of work, and their work wassimply assigned to them. Not surprisingly, this third group did not judge thisprocess to be particularly fair. But the other two groups, even those who knewtheir 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 theirinstrumental value. It has been suggested, in fact, that procedural justice isdesirable not for its instrumental value, but because it communicates that thosewho 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 desirablebecause it creates an intrinsically desirable organizational order, an order thatcommunicates value, respect, and dignity, and so an order which elicits trust,organizational commitment and loyalty, which leads participants to attributelegitimacy to the organization's leaders and their decisions, and which leadsparticipants 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 areintensely loyal to it and its leadership.

This research on procedural justice has highly significant implications forbusiness organizations. Simply put. organizations that are comprised of proc-esses that are just are better organizations in that they function better than thosethat 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 neededresources from its external environment, (3) the quality of an organization'sinternal processes and information, and (4) an organization's ability to at leastminimally satisfy all of its strategic constituencies, including suppliers, consum-ers, employees, and so on.^' The research on procedural justice demonstratesthat procedural justice has a positive impact on each of these elements. Proce-dural justice enhances an organization's ability to attain its goals because whenorganizational decision-making processes are just, they impart a legitimacy tothe organization leaders and acceptance of their decisions that enables them tolead the members ofthe organization toward its goals. Procedural justice enablesthe 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 currentand prospective employees. Procedural justice enhances the organization's in-


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 satisfyits strategic constituencies because its constituencies will perceive the share oforganizational resources allotted to them as fair and acceptable. In sum, proce-dural justice is essential for organizational effectiveness. And, surely, nothingcan matter more to a business organization, whatever its strategic goals, than thefundamental means to those goals: organizational effectiveness.

Conclusion

We have argued, then, that Plato was right: justice is more profitable, morerational, and more intrinsically valuable than injustice, even in business. Theresearch on prisoners' dilemmas shows that ethical behavior is more profitableand more rational than unethical behavior in terms of both the negative sanctionson unethical behavior and the positive rewards of ethical behavior; and thepsychological 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. Thereis, 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 whichmorale is high and in which members are motivated to work harder and moreproductively at achieving organizational goals, and reason to suspect that thejustice of an organization bears some significant relationship to its stability, i.e.,its ability to maintain its essential functions through periods of stress and inturbulent environments.'^ But enough has been said to show that Plato wascorrect and that Thrasymachus and his modern counterparts are wrong. Ethicsin general and justice in particular matter tremendously for the profit-orientedself-interested business organization.

Notes

1. Amar Bhide and Howard H. Stevenson, "Why be Honest if Honesty Doesn't Pay," HarvardBusiness 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, manytranslations

4. Something that Kant points out in his Groundwork ofthe Metaphysics of Morals, sectiontwo.

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


suffered injustice and have had experience of both, not being able to avoid the one andobtain 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 termedby them lawful and just. This they affirm to be the origin and nature of justice;—it is amean or compromise, between the best of all, which is to do injustice and not bepunished, 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, butas the lesser evil, and honored by reason of the inability of men to do injustice. For noman who is worthy to be called a man would ever submit to such an agreement if he wereable to resist; he would be mad if he did. Such is the received account, Socrates, of thenature 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 ofMichigan Press, 1965).

9. For a non-technical and fascinating overview of the history and significance of prisoner'sdilemma research, see William Poundstone, Prisoner's Dilemma (New York: Anchor BooksDoubleday, 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); anearlier and more compact summary of the computer studies Axelrod carried out is in RobertAxelrod, "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 andempirical research on iterated Prisoner's dilemma, see Robert Axelrod and Dougliis Dion, 'TheFurther 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 anyindividual or group that can affect and be affected by the operations of a firm, and so can besaid to have a "stake" in what the firm does See R. E. Freeman, Strategic Management: AStakeholder Approach, (Marshfield, MA: Pitman, 1984). As the prisoners' dilemma analysisthat follows suggests, stakeholder power to affect the operations of the firm coupled with thelikelihood of repeated interactions makes it both irrational and unprofitable for the firm tobehave 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 tellingtheir 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 reputedjust 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 throughwhich organizations that train, condone, or allow dishonest practices toward chents, custom-ers, vendors, and distributors, gradually filter out ethical employee behavior and increase thelevels of unethical organizational behaviors. His model, labeled the "triple tumor structureof 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 advantageof customer gullibilities or vulnerabilities. This initial introduction of dishonesty into the


operations of the firm may yield short-term profits. However, the dishonest treatment ofoutsiders will ultimately result in a damaged company reputation, lower levels of returnbusiness, 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 companyand the values of honest employees. The mismatch will lead honest employees to leave thecompany, 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 wellin and for the company, will be employees whose values match the dishonest values of thecompany, i.e., dishonest employees. Over time the number of honest employees will declinewhile the number of dishonest employees will rise, leading to an increase in levels of companydishonesty. Thirdly, in order to cope with the rising levels of dishonesty, the company willbegin to implement auditing systems, inventory checks, and security systems. Company useof 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 declininglevels of voluntary employee cooperation. In addition, the use of surveillance systems willcreate a perception among employees that they are expected to perform well when undersurveillance, but to feel justified in cheating when the surveillance systems can be tricked orescaped. And, finally, the use of surveillance systems will lead managers to believe that it isthese systems that cause employees to be honest and this belief will lead them to install moreand increasingly sophisticated systems. The use of ever more surveillance, however, will leadto ever declining levels of trust and ever rising attempts to cheat the systems, which in turnwill motivate the use of additional surveillance. Gradually, then, the dishonesty initiallyintroduced 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 inBusiness, Kellog'Graduate School of Management, Northwestern University, Chicago, July31, 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 wewelcome for their own sakes, and independently of their consequences, as, for example,harmless pleasures and enjoyments, which delight us at the time, although nothingfollows 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 aredesirable 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 — t̂hese do us good butwe regard them as disagreeable; and no one would choose them for their own sakes, butonly 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 happydesires 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 thetroublesome class, among goods which are to be pursued for the sake of rewards and ofreputation, but in themselves are disagreeable and rather to be avoided.

I know, I said.


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 SocialPsychology, vol. 67, (1963), "Inequity in Social Exchange," in L. Berkowitz (ed.). Advancesin 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 (NewYork: Academic Press, 1976), pp. 43-90.

19. Aristotle, Nicomachean Ethics, [c. 330 B.C.], translated by David Ross, (London: OxfordUniversity Press, 1966), p. 1131

20.1. R. Andrews, "Wage Inequity and Job Performance: An Experimental Study," Journalof Applied Psychology, vol. 51, (1967), pp. 39-45; J. S. Adams & S. Freedman, "Equity TheoryRevisited: 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 SocialPsychology, vol. 3 (1973), pp. 325-334; J. Greenberg, "Approaching Equity and AvoidingInequity in Groups and Organizations," in J. Greenberg & R. L. Cohen (eds.). Equity and Justicein 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 WorkerPerformance 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," Journalof Personality arui Social Psychology, vol. 25 (1973), pp. 151-176; Elaine WaJster has alsowritten 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 perceptionsto make the world appear to them to be more just, see Melvin J. Lemer, The Belief in a JustWorld (New York: Plenum Press, 1980).

24. M.K. Utne and R.F. Kidd, "Equity and Attribution," m Gerold Mikula (ed.). Justice andSocial Interaction (New York: Hans Huber Publishers, 1980), pp. 63-94.

25. S. Schwartz, "Normative Influences on Altruism," in L. Berkowitz (ed). Advances inExperimental 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.). Justiceand Social Interaction (New York: Springer-Verlag). pp. 25-61.

26. M. Deutsch, "Equity, Equality, and Need. What Determines Which Value Will Be Usedas 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 SocialIssues, vol. 31 (1975), pp. 45-64.

27. M. Deutsch, Ibid., T. Schwinger, "Just Allocations of Goods: Decisions .Among ThreePrinciples," in Gerold Mikula, ed.. Justice and Social Interaction (New York: Springer-VerlagNew York, Inc., 1980), pp. 95-125; Gerold Mikula. "On the Role of Justice in AllocationDecisions," in ibid., pp. 127-66


28. Deutsch, 1975; Sampson, 1975.Leventhal, 1976; Morton Deutsch, "Egalitarianism mthe Laboratory and at Work," in Melvin J. Lemer and Riel Vermunt, (eds.). Social Justice InHuman 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 inExperimental 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 andReceiving Help," Sociometry, vol. 34 (1971), pp. 290-301; D. Krebs, "Altruism—An 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 theyact to remove the injustice in order to remove the source of distress. Such models imply thatself-interest moves people to avoid injustice and seek justice. Other models of distributivejustice hold that people seek seek distributive justice in their exchanges with others becausethey are trying to balance their desire for personal gam, against the risk of provoking conflictby taking too much. Again, such models imply that justice is valued only instrinsically. Thereis perhaps no way to definitively disprove such models since to some extent the egoistassumptions built into them are nonfalsifiable. What is possible, and what I attempt to do inwhat follows, is show that there is a good deal of evidence that suggests that distributive justiceis not desired only for its instrumental value. This research provides evidence that is difficultto account for within the egoist models. But, with enough manipulation, it is possible to forcethe data to fit into the egoist models.

32. T. Tyler & R. M. Dawes, "Fairness in Groups: Comparing the Self-interest and SocialIdentity Perspectives," in B. A. Mellers & J. Baron, (eds.). Psychological Perspectives onJustice (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 FutureInteraction in Reward Allocations in Dyads: Equity or Equality," Journal of Personality andSocial 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 UltimatumBargaining," Journal of Economic Behavior in Organizations, vol. 3, pp. 367-88; see alsoDaniel 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," AmericanEconomic Review, vol. 79, pp. 335-85.

35. J. W. Minton, J. W, Justice, Satisfaction, and Loyalty: Employee Withdrawal and Voicein 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 SocialInstitutions," paper presented at the annual Academy of Management meeting, Miami BeachFL (1991, August); D. Kahneman, J.L. Knetsch, and R. Thaler, "Fairness as a Constraint onProfit 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: ThePerceived Legitimacy of Market Exploitation," Journal of Behavior in Decision Making.


37. Plato, Republic, book two, Jowett translation. Again, it is worth quoting the entirepassage:

[Socrates:] And would you tell me, whether you think that a state, or an army, or a bandof robbers and thieves, or any other gang of evil-doers could act at all if they injured oneanother'^

[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, havingthis tendency to arouse hatred, wherever existing, among slaves or among freemen, willnot make them hate one another and set them at variance and render them incapable ofcommon 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 semin£il study in thefield of research on procedural justice

39. Robert Folger & M. A. Konovsky, "Effects of Procedural and Disuributive Justice onReactions 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 andDistributive 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 ofProcedural 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 citizenencounters with police officers see T. R. Tyler & R. Folger, "Distributional and ProceduralAspects 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 ofprocedural justice in student-teacher relations see T. R. Tyler & A. Caine, "The Influence ofOutcomes and Procedures on Satisfaction with Formal Leaders," Journal of Personality andSocial Psychology, vol. 41 (1981), pp. 643-55; for studies of procedural justice in politics seeT. R. Tyler, K. Rasinski, & K. McGraw, "The Influence of Perceived Injustice on Support forPolitical Authodties," Journal of Applied Social Psychology, vol. 15 (1985), pp. 700-25.

42. J. Greenberg, "Organizational Performance Appraisal Procedures. What Makes ThemFair?" m R. J. Lewicki, B. H. Sheppard & M. H Bazerman, (eds). Research on Negotiation inOrganizations, 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 andKonovsky, "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, (NewYork: Plenum. 1980), pp. 27-55. and G. S. Leventhal, J. Kamza, and W R Fry, "Beyond


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 onReactions to Pay Raise Decisions"; S. Alexander & M. Ruderman, "The Role of Proceduraland 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 Satisfactionwith 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 onthe 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 ofManagement Executive, vol. 2 (1988), pp. 155-58; D. W. Organ, Organizjational CitizenshipBehavior: the Good Soldier Syndrome (Lexington, MA.: Lexington Books, 1988)

47. C.E. Miller, P. Jackson, J. Mueller, & C. Schershing, "Some Social Psychological Effectsof 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 IdentityPerspectives."

48. Robert Folger and Mary A. Konovsky, "Effects of Procedural and Distributive Justiceon 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 onSatisfaction with Leaders: Exploring the Meaning of Process Control," Journal of Personalityand Social Psychology, vol. 48, (1985), pp. 72-81.

49. E. A. Lind, R. Kanfer, P.C. Earley, "Voice, Control, and Procedural Justice: Instrumentaland Noninstmmental Concerns in Fairness Judgments," Journal of Personality and SocialPsychology, (1990), vol. 59, no. 5, pp. 952-59.

50. R. E. Lane, "Procedural Goods in a Democracy: How One is Treated Versus What OneGets," Social Justice Research, (1988), vol. 2, pp. 177-192; E. A. Lind and T. R. Tyler, TheSocial 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 andRaise 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 ManagementStudies (July 1981); and K. Cameron, "Critical Questions in Assessing Organizational Effec-tiveness," Organizational Dynamics, (Fall 1980). It should be noted, however, that the conceptof organizational effectiveness has had its critics See J. P. Campbell, "On the Nature ofOrganizational Effectiveness," m P.S. Goodman and J. M. Pennings, eds.. New Perspectiveson Organizational Effectiveness (San Francisco: Jossey-Bass, 1977).

52. Companies, for example, that have a strategic commitment to just treatment of theiremployees and customers seem to have these qualities. An excellent example is LincolnElectric 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.

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