Beyond Bathsheba: Managing Ethical Climates Through Pragmatic Ethics

This paper explores the puzzling nature of leader behavior in order to understand the conditions that encourage unethical decision-making. Building on the extant literature of pragmatic ethics, I explore how leaders can increase the quality of ethical decision-making within their organizations by understanding the incentives of rational choice. I have developed a rational choice-based ethical decision-making model to understand the incentives behind ethical leader behavior and find that ethical behavior is likely to be rational as long as audience costs remain higher than the savings benefits incurred by unethical behavior. I conclude with analysis of how the ethical rational model compares to other prominent theories that explain unethical leader behavior and propose that the probable outcomes derived from my model better explain bad leader behavior than competing control-oriented models. The results of this inquiry underscore the transactional and practical characteristics of leadership as a tool to help leaders manage their ethical climates, improve business practices and management policies, understand the nature of individual incentives, and capture transactional components of leader behavior. Introduction Ethical literature provides broad considerations for guiding individual and social interaction and enhancing the general welfare of society. However, despite the maturity of the scholarly ethical discipline, stories of leaders who exhibit unethical behavior are legion. Such leaders exhibit such poor behavior for seemingly no logical reason; as prominent business, government, and military leaders, they are all highly intelligent, well educated, economically well off, and professionally accepted at the highest levels. These leaders appear to have everything going for them, yet risk ethical misbehavior for relatively modest gains. This observation presents an interesting puzzle: why do seemingly advantaged leaders engage in poor ethical behavior when they already have such an advantage over others? Moreover, what can leaders do to avoid such behavior? In answering this puzzle, several explanations come to mind. Theories involving issues of greed, competition, relative power differences at top echelons of responsibility, and mental illness could offer simple explanations for potentially complicated behavior. However, scholars offer other explanations that are more helpful but that remain altogether unsatisfying. Park, Westphal, and Stern (2011) find that flattering comments from subordinates to CEOs are causal in producing leader overconfidence and biased decisionmaking (Park, Westphal, & Stern, 2011). Park et al. find that high social status in leaders exposes them to increasing levels of flattering comments and behavior (p. 261) which JOSEPH E. LONG CHARLESTON, WEST VIRGINIA, US inflates a leader’s sense of effective personal judgment and decreases a leader’s ability to recognize poor performance or challenge ineffective strategies (p. 267). Park et al.’s research suggests that leader behavior evolves over time so that leaders expect unwavering conformity and fall victim to “believing their own press” where they lose the ability to identify personal and performance-oriented shortcomings (p. 259). Other scholars offer a simpler explanation for unethical leader behavior related to competition and relative power differentials at top levels of leadership. Ludwig and Longenecker (1993) noted that “ethical violations by upper managers are the by-product of success, not of competitive pressures” which makes the aforementioned puzzle even more intriguing (Ludwig & Longenecker, 1993, p. 265). According to the authors, ethical misbehavior evolves as leaders become complacent, gain access to privileged information, increase access to critical resources, and gain the ability to manipulate more favorable outcomes (p. 265). In short, this theory provides an ego-centric approach to understanding bad leader behavior, in contrast to the success-oriented theory proposed by Park et al., to explain unethical leader behavior as involving more than the need to cut corners in an increasingly competitive environment. In the spirit of pragmatic ethics, I am proposing a more parsimonious explanation for leader behavior. As scholars note, pragmatic ethics is about the process of decisionmaking such that “good ethical choices emerge through the use of inquiry” (Johnson, 2015), as well as “giving primacy to habits” which “carry the past into the present” (LaFollette, 2013, p. 402). In understanding pragmatic ethics, a strategic choice model will add to ethical leadership literature and provide a unique explanation for how ethical considerations positively or negatively influence expected leader behavior. The results of this inquiry underscore the transactional and practical characteristics of leadership as a tool to help leaders manage their ethical climates, improve business practices and management policies, understand the nature of individual incentives, and capture transactional components of leader behavior. This paper employs a deep-dive approach to understanding pragmatic ethics to uncover how pragmatic ethical processes give primacy to more strategic ethical decision-making. Furthermore, I employ the expectations of pragmatic ethics as utility variables that impact the strategic nature of ethical decision-making and present a rational choice model to uncover the conditions that incentivize ethical leader choices. Pragmatic Ethics Pragmatic ethics can positively influence strategic decision-making to underscore the fundamental and continuing Deweyan notion that pragmatic ethics remain process-centric, scientifically compatible, logical, and habit-driven (Johnson, 2015; LaFollette, 2013). Furthermore, the literature of pragmatic ethics sufficiently uncovers a relationship between ethical considerations and strategic choices that provide a nuanced understanding of the variables that inform leader choices in ethically-challenging environments. Whitford (2002) challenges rational actor theory and its assumed “paradigmatic privilege” by challenging the “portfolio” assumption that beliefs and desires are sufficient inputs for strategic utility models (Whitford, 2002, p. 327). However, Whitford’s theory takes an overly continuous view of pragmatism where “ends” of one choice become the “means” of the next choice. In countering Whitford’s argument, a strategic choice model would reduce the level of analysis from the systematic to the individual level and take a Bayesian approach to understanding changes in decision-making over time. In pragmatic terms, lessons learned through early leader choices impact the habits of leader choices in later decisions (LaFollette, 2013). Using a business-oriented model, Woiceshyn (2011) examines ethical decision-making through the premise that “unethical decisions harm the decision makers themselves as well as others, whereas ethical decision makers have the opposite effect” (Woiceshyn, 2011, p. 311). The author presents a theory of rational egoism where “reasoning (conscious processing) and intuition (subconscious processing) interact through forming, recalling, and applying moral principles necessary for long-term success in business” (p. 312). Woiceshyn also considers previous studies that found “managers employ the same process when making decisions involving ethics as they do for any long-term decisions affecting their companies” to imply that ethical choices can be more optimal than unethical ones, which supports my research interests in rational ethics (p. 312). Furthermore, Woiceshyn introduces causal factors for leader behavior to include audience costs and the probability of getting caught; this “moral intensity” according to Trevino and Youngblood, can be applied in a strategic choice model (p. 312). In addressing LaFollette’s (2013) habit-forming aspects of pragmatic ethics, Caras and Sandu (2014) argue for the “epistemic and pragmatic need and academic functioning of a model embodied in ethical expertise” (Caras & Sandu, 2014, p. 142). For Caras and Sandu, ethical expertise involves “rigorous training in moral philosophy” as “an imperative condition for an ethics expert, precisely because his role is to provide professional counseling to professionals whose expertise does not involve ethics exclusively” (p. 143). Although Caras and Sandu fail to address the relative utility of expert counsel, they clarify the distinction between performative and pragmatic expertise, which makes a valuable connection between ethical counseling and utility. Ali and Lin (2013) explore pragmatism in voter theory to identify when a rational person would “incur the cost of voting, even when it is improbable that any one of them is pivotal” (Ali & Lin, 2013. p. 73). This gives explanatory power to understanding the potential costs of ethical behavior given inherent inefficiencies in achieving outcomes in intensely competitive environments. Ali and Lin also offer a mathematical explanation for voter behavior and add support for the rational approach by identifying how audience costs and varying probabilities of being caught can impact the expected utility of leader choices. They also imply that increased transparency can influence the above factors and add further explanatory power to a strategic choice model to imply that ethical transparency might also motivate ethical decision-making for a rational actor. Pihlström (2013) investigates religious pragmatism as “a middle path option for those who do not want to give up either their scientific worldview or their possible religious sensibilities” (Pihlström, 2013, p. 27). This concept avoids the scientific implications of my research into rational pragmatism by sidelining the strictness of empirical evidence toward a “richer conception of evidence as something that can be had, or may be lacking, in the 'laboratory of life’“(p. 28). However, the author does suggest