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Max. Classroom Capacity: How Should We Teach Ethics in I-O Psychology?

Loren J. Naidoo, California State University, Northridge

I always tried to technically follow the rules, but I also undermined the principle of the rule by finding the loophole.  - Andrew Fastow, former CFO of Enron, released from prison in 2016.

The recent flurry of ethics scandals in work organizations (e.g., Wells Fargo, Boeing, Facebook), sports (e.g., Houston Astros), entertainment (e.g., Harvey Weinstein, sexual harassment at CBS, NBC, and Fox), higher education (“Operation Varsity Blues”), and the U.S. government (take your pick!) have made me think about how we teach ethics and what we can do to cope with this crisis of ethics. One might argue that we are in a golden age of scandal and corruption, and at a nadir of public trust in institutions. A 2019 Pew Research Center report noted that in the USA, public trust in the government has been on a steady decline since the 9/11 terrorist attacks and is close to its lowest point in the past 60 years, which occurred during the Obama administration in 2011. Public trust in medicine, education, and the press have also declined in the USA (Trust in the scientific community has remained steady—yay, that’s us!—whereas trust in the military has increased.). The following percentages of Americans think that members of these groups behave unethically some, most, or all of the time: members of congress (81%), leaders of technology companies (77%), religious leaders (69%), journalists (66%), and police officers (61%). In addition to high-profile ethics scandals, there seems to be less legal accountability for those responsible for the kinds of ethics violations that typically concern I-O psychologists. According to data from the Justice Department analyzed by the Transactional Records Access Clearinghouse at Syracuse University, prosecutions of white-collar criminals have been cut nearly in half between 2011 and 2018 (it seems unlikely that white-collar crime itself has decreased). This is despite white-collar crimes costing the USA several hundred billion dollars per year. President Trump’s recent pardons of several well-connected white-collar criminals of charges including fraud, racketeering, violating securities laws, cheating on taxes, lying to officials, and money laundering may lend further credence to the idea that ethics doesn’t matter. It’s important to note that ethics scandals are not unique to the US, and a general distrust of institutions is also in vogue in many countries including Australia, Germany, France, Japan, and the UK.

Although things may look particularly grim at the moment, educators have long recognized the importance of teaching business ethics. Let me pause here and say that I will dive into the research on business ethics courses, which may be more characteristic of business schools than I-O psychology programs, but we’ll come back to I-O again. Many business ethics and business and society courses were first developed in the 1950s (Weber, 1990). Prominent ethics scandals in the late 1980s (e.g., the savings and loan crisis) then again in the early 2000s (Enron, WorldCom) further motivated academics to bolster ethics content in curricula, this time influenced by Kohlberg’s (1976) theory of moral reasoning. Scandals in the mid to late 2000s (e.g., the subprime mortgage crisis) prompted another round of introspection, and a renewed push for corporate social responsibility and ethics coursework. Perhaps we’re starting yet another round now. But do business ethics courses work?

Before answering this question, it’s worth considering the different ostensible aims of business-ethics courses. For some the objective is to increase student awareness of and ability to identify ethical issues (e.g., is it unethical to ignore strict pollution standards when all of your competitors are doing the same?). For others, as suggested by Kohlberg, the objective is to develop students’ moral reasoning (e.g., why is it wrong to bribe a government official to obtain a contract)? A third approach is based purely on compliance—teach students the rules and how to follow them. A fourth is to describe how social systems can produce unethical behavior (e.g., organizational culture, the power corruption cycle). I’m sure there are other approaches, too. Given these different objectives, relevant outcomes of ethics courses include ethical awareness, moral reasoning, and/or ethical behavior, among others. OK, back to the question, do business ethics courses work?

Attempts to empirically evaluate the effectiveness of business ethics courses go back to at least the late 1980s. Waples, et al. (2009) meta-analysis provides a comprehensive summary of this research. First, they found a small effect overall for business ethics instruction on outcomes, but moderators were present. Second, in terms of criteria, ethics instruction had a medium to large effect on moral reasoning, a small effect on ethical awareness, and no beneficial effect on ethical behavior (there were only two studies on ethical behavior). Third, content focusing on job specific compared to global ethical skills worked better. Fourth, course content that focused on cognitive reasoning compared to training ethical behaviors worked better. Fifth, professional ethics workshops or seminars were much more effective than instruction in academic settings. Sixth, instruction for developmental purposes was more effective than for educational or (even more so) compliance purposes. To boil it down even further, they (Waples et al.) found that ethics instruction can have beneficial effects, mostly when it targets job specific skills and moral reasoning—and not often in academic settings—but it appears to have no beneficial effects on ethical behavior, though more research is needed on that question. Some recent research suggests that ethical behaviors can be encouraged through training. Warren et al. (2014) found that ethics training at work had a positive effect on ethical organizational culture, but the effects dissipate after 2 years. Warner et al. (2011) found that battlefield ethics training reduced unethical behavior in U.S. Army soldiers.

On the whole, that’s a mixed bag. Yes, the evidence suggests that ethics courses can be effective, but the answer to the central question of whether they impact ethical behavior at work is either “no” or “not sure.” Further, it looks like the university setting is not as effective as the workplace for ethics training. So how do we move forward in light of the growing (or at least continuing) problem of unethical behavior?

Let’s first think about why people engage in unethical behaviors. The Kohlbergian approach suggests that ethics failures are a result of poorly developed moral reasoning among individuals. Therefore, we should help students develop their moral reasoning via education. Again, ethics courses with this focus do tend to improve students’ moral reasoning (Waples et al., 2009). The use of ethics cases is one method commonly used to develop moral reasoning. Brenner and Molander (1977) devised some such ethics cases, one of which is provided below:

What would you do if the minister of a foreign nation where extraordinary payments to lubricate the decision-making machinery are common asks you for a $200,000 consulting fee? In return, he promises special assistance in obtaining a $100-million contract which would produce at least a $5-million profit for your company. The contract would probably go to a foreign competitor if your company did not win it. (p. 57)

Another possibility is that people engage in unethical acts out of ignorance of relevant policies and laws. This view underlies the ethics-as-compliance approach in which students are informed of the relevant laws, procedures, policies, guidelines, and (in)appropriate behaviors. Standard I-O course content that addresses discrimination and adverse impact in selection, the ADA, sexual harassment, and so forth, might fit into this approach. However, ethics courses may have only small effects on ethical awareness (Waples et al., 2009), so it’s not clear how effective conventional approaches to teaching compliance have been. Plus employees may consider this approach to be intellectually shallow, manipulative and controlling, as memorably depicted in the “Business Ethics” episode of the TV show The Office.

As Andrew Fastow explains:

So, you could tell people to be ethical, have beautifully written statements about company values and all that, but you have a CFO who does a deal that's intentionally misleading to the outside world. You have to remember we hired the brightest, most ambitious young people, and they were smart enough to figure out what the CFO just did. And so, despite your corporate code of conduct and your code of ethics, those people saw that this guy became CFO, and he is incredibly misleading. So they decide, “I’m going to be misleading. I will be misleading to the people I work with and to my customers.”

Research in social psychology suggests that there’s a social component to unethical behavior (e.g., Kilduff & Galinksy, 2017). Anecdotally, many individuals who engage in unethical conduct do not at the time perceive their behaviors as unethical. One might attribute this to a lack of ethical awareness. However, an alternative interpretation is that such an awareness is fundamentally influenced by social factors such as the normalizing of unethical behaviors by in-group members (coworkers, managers, executives). Fastow notes: “I rationalized it by saying, ‘This is how the game is played,’ but it was really just a lack of character on my part.”

Laboratory research by Dan Ariely (summarized in Ariely’s 2009 TED Talk) suggests that everyone cheats a little, up to the point that cheating undermines our positive self-impressions. Thus, identity plays a role too. Perhaps our identities as psychologists make I-Os have a lower threshold for unacceptably unethical conduct. Maybe that’s optimistic and out of line with prominent examples of psychologists who have acted unethically (e.g., the APA and torture). I think the focus in I-O psychology on ethical principles in human-subjects research is a good starting point for building an identity among our students that is centered on ethical conduct. Extending this idea, instead of merely trying to reduce ethics failures, perhaps we should seek to broaden the positive impact that I-O psychologists can have on the world. Gloss et al. (2017) argued for I-O psychology to reorient itself away from serving corporate interests and toward more humanistic concerns. Also worth reading are Gerard’s (2017) response to Gloss et al., and my former colleague Joel Lefkowitz’s (2017) book on ethics and values in I-O.

Fastow comments, “I think it was a bad corporate culture. People were incentivized to do the wrong things, and senior management, including myself, set very bad examples by the decisions we were making.”

Ethics scandals can be understood using systems theory (e.g., Senge et al., 2019). In systems theory, unethical behavior is the product of the complex system comprised of the organization and the external environment in which it operates. For example, the power corruption cycle describes how leaders with a lot of power and little accountability develop an inflated view of their own importance, distance themselves from their employees, and elicit compliance, flattery, and submissive behaviors from their subordinates. As a result, they become insulated from critical information that leads them to believe that they are omnipotent, to make bad decisions, and often to engage in unethical behavior. The Enron case provides a fantastic example of these systems in action, as depicted in the 2005 Oscar-nominated documentary, Enron: The Smartest Guys in the Room. Or, if that’s too long, assign to your students the TRACE podcast interview of Peter Elkind, one author of the book upon which the documentary is based.  We can see this once again from Fastow:

I think of generic questions like, “If I own this company and I were leaving it to my grandchildren would I make this decision?” A simple question like that would have caught 99 percent of the fraud that went on at Enron, because the answer would have been “No.”

If you found this brief summary of different ideas of how to teach ethics dissatisfying, so did I! There aren’t nearly enough solutions or novel approaches described here, and I would love to hear more of them from you. How do you approach teaching ethics in your classrooms? Readers, please send me your comments, questions, and feedback. Loren.Naidoo@CSUN.edu


Ariely, D. (2009). Our buggy moral code [Video file]. Retrieved from https://www.ted.com/talks/dan_ariely_our_buggy_moral_code?language=en

Brenner, S. N., & Molander, E. A. (1977). Is the ethics of business changing? Harvard Business Review, 55(1), 57–71.

Gerard, N. (2017). Handmaidens to capitalism. Industrial and Organizational Psychology: Perspectives on Science and Practice, 10(3), 410–414.

Gloss, A., Carr, S. C., Reichman, W., Abdul-Nasiru, I., & Oestereich, W. T. (2017). From handmaidens to POSH humanitarians: The case for making human capabilities the business of I-O psychology. Industrial and Organizational Psychology: Perspectives on Science and Practice, 10(3), 329–369.

Kilduff, G. J., & Galinsky, A. D. (2017). The spark that ignites: Mere exposure to rivals increases Machiavellianism and unethical behavior. Journal of Experimental Social Psychology, 69, 156–162.

Kohlberg, L. (1976). Moral stages and moralization: the cognitive-developmental approach. In T. Lickona (Ed.), Moral Development and Behavior: Theory, Research, and Social Issues (pp. 31-53). New York, NY: Holt, Rinehart and Winston.

Lefkowitz, J. (2017). Ethics and values in industrial-organizational psychology, 2nd ed. New York, NY: Routledge/Taylor & Francis Group.

Senge, P., Hamilton, H., & Kania, J. (2019). The dawn of system leadership. Policy & Practice (19426828), 77(1), 12–19.

Waples, E. P., Antes, A. L., Murphy, S. T., Connelly, S., & Mumford, M. D. (2009). A meta-analytic investigation of business ethics instruction. Journal of Business Ethics, 87(1), 133–151.

Warner, C. H., Appenzeller, G. N., Mobbs, A., Parker, J. R., Warner, C. M., Grieger, T., & Hoge, C. W. (2011). Effectiveness of battlefield-ethics training during combat deployment: A programme assessment. Lancet, 378(9794), 915–924.

Warren, D. E., Gaspar, J. P., & Laufer, W. S. (2014). is formal ethics training merely cosmetic? A study of ethics training and ethical organizational culture. Business Ethics Quarterly, 24(1), 85–117.

Weber, J. (1990). Measuring the impact of teaching ethics to future managers: a review, assessment, and recommendations. Journal of Business Ethics, 9, 183–190.

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