Corporate Ethics Can Affect an Organization’s Bottom Line

Topic(s): ethics, turnover, workplace culture
Publication: Journal of Applied Psychology
Article: Does Ethical Membership Matter? Moral Identification and Its Organizational Implications
Authors: D.R. May, Y.K. Chang, R. Shao
Reviewed by: Ben Sher

Corporate ethics are always a hot news topic, especially when multi-millionaires are shamefully led away in handcuffs due to widespread criminal behavior. When “cooking the books” or other illegalities can threaten to destroy or tarnish the reputation of any company, ethics and morality need to be at the forefront of organizational concerns. New research (May, Chang, & Shao, 2015) sheds new light on the advantages of businesses engaging in morally responsible behavior. It’s not merely that they avoid the harmful consequences of being caught, but there may be inherent advantages to being an ethical organization, especially in regards to employee behavior.


The authors propose a new concept called moral identification. This is the extent to which employees feel a sense of personal identification with an organization, specifically based upon the organization’s moral behavior. And it makes sense. If I believe that I am a generous and giving person, but I consider my company to be greedy, then I will not consider myself to be “similar” to my company. On the other hand, if I work for a company that is known for its generosity and charitable activities, then it’s as if I am “similar” to my company.


Moral identification may sound like a simple and intuitive matter, but the authors conducted several studies to show that moral identification has important outcomes, and appears to affect employee behavior. In the first study, the authors found that moral identification explains why employees who put extra value on moral behavior are attracted to organizations that also behave morally. In other words, moral people want to work at moral organizations because they recognize that the organizations are “similar” to themselves. This dynamic could be used to an organization’s advantage, and help them attract employees who have higher ethical standards and are less likely to engage in unethical behavior that compromises productivity.


In a second study, the authors found that employees who morally identify with their organization are less likely to engage in certain unethical behavior on the job. The authors specifically measured unethical pro-organizational behavior, which means something that benefits the organization but still breaks laws or standards. The authors found that this type of behavior was reduced when employees had a moral identification with the company. The authors say that people have a need to be consistent in their thoughts and actions. Basically, if employees consider themselves to be moral and believe they are similar to their company because it is also ethical, then they have greater impetus to maintain their standards by actually acting morally. This second study shows that ethical organizations don’t merely attract ethical employees, but also continue to promote ethical behavior once they are on the job.


The third and final study showed that when employees morally identify with their organizations, they are more likely to remain on the job, resulting in lower turnover. Again, employees need to be consistent in their actions, and if they believe that they work for a company because it is ethical, they naturally would want to remain working for that company. The authors also found that when organizations did not act ethically, all bets were off. Under these circumstances, employees who once had a moral identification would not necessarily remain in the job now that ethical behavior was compromised.


In this study, the authors found that when employees perceive that they are similar to an organization based upon ethical values, three things occur. These type of employees are attracted to the organization, they engage in less unethical behavior when on the job, and are less likely to turnover. In sum, this means that organizations stand to gain when demonstrating and championing ethical behavior. It’s not merely a ruse for publicity, or to avoid the harsh ramifications associated with being caught. Instead, ethical organizations benefit via the type of job applicants they attract, as well as employee behavior while on the job.

How can an organization improve its reputation as an ethical organization? The authors make several recommendations, including espousing ethical values to potential employees during recruitment, and incorporating ethical standards into incentive programs and performance management processes. Finally, this research is important because it helps reframe ethical behavior as something organizations should strive toward—with clear and measurable payoffs for all—as oppose to a set of threatening rules to be wary of in order to avoid jail time.


May, D. R., Chang, Y. K., & Shao, R. (2015). Does ethical membership matter? Moral identification and its organizational implications. Journal of Applied Psychology, 100(3), 681-694.