5 Stages of Corporate Ethical Development
Reidenbach & Robin’s model proposes that there are five stages of organisational morality and ethics. organisations typically progress through these as they develop, though not all organisations pass through all of the stages.
At the lowest stage, referred to as “amoral”, an organisation’s concern for profits far outweighs its concern for ethics.
organisations demonstrate an increasing concern for ethics at the cost of profit as they progress through the “legalistic”, “responsive” and “emerging ethical” stages of moral development.
Once organisations have fully balanced their concern for ethics and profits, they have reached the last stage or moral development and are considered to be “ethical” organisations.
The model argues that an organisation’s culture (the shared values and believes of its members, or ”the way we do things here”), which is heavily influenced by leadership role-modelling, is the foundation on which organisational morality develops. The model was inspired by theories of personal moral development.
Stage 1 – Amoral organisations
The lowest level of organisational development occurs in Amoral organisations. At this level the only concern the organisation has is for profit and it will break any ethical or moral rules in the pursuit of that profit. organisations like this typically don’t last long.
Stage 2 – Legalistic organisations
The lowest level of sustainable moral development for organisations occurs in Legalistic organisations. organisations at this stage understand the rules and adhere to existing legal and regulatory frameworks. They’re often willing to stay just on the right side of the law in their pursuit of profits. These organisations adhere to laws not through any form of ethics or morality, but simply because doing so is their only route to sustainable profit.
Stage 3 – Responsive organisations
The middle level of organisational morality sees the emergence of Responsive organisations. While these organisations are still highly focused on profit, there’s an increasing awareness of morality and a desire to “do the right thing” where possible. At this stage, organisations are responsive in their morality and not yet proactive and seeking to be moral and ethical leaders.
Stage 4 – Emerging ethical organisations
The penultimate stage of moral development results in Emerging Ethical organisations. At this stage organisations nearly balance their concern for morality and profit. These organisations increasingly and proactively consider morality and ethics in their strategic and operational decisions. They usually look to undertake their business ethically as a matter of principle and these behaviors start to permeate their wider organisational culture.
Stage 5 – Ethical organisations
The ultimate stages of moral development that organisations can achieve is reflected by Ethical organisations. At this stage an organisations concern for ethics is perfectly balanced with their concern for profits. Decisions about the organisation’s direction and operations are all made with concern for their ethical impact, and the leadership demonstrate and role-model high levels of morality. These organisations are moral leaders within their industries and their internal cultures are highly moral.
Improving organisational Morality
The moral development of an organisation is effectively a reflection of the organisation’s culture. Improving the morality of an organisation is, therefor, an exercise in cultural change. Efforts to change organisations in this way usual involve a program of organisational development interventions. As with all change efforts of this nature, it’s advisable to follow best practice models of organisational change such as Kotter’s 8 step model or Lewin’s 3 stage model of change.
Though there are many factors that affect the culture of an organisation, including its vision and purpose, espoused values and internal communications, the factor that will have most impact on organisational morality is leadership.
While it’s possible to create organisational change programs to address the broader cultural aspects of morality, the individuals who work in any organisation will ultimately take their behavioral cues from those above them.
In short, improving organisational morality requires improving leadership morality.
Learning More
The 5 Stages of Corporate Ethical Development detail how organisations may progress towards becoming a responsible business. Responsible businesses can be thought of as businesses that focus not just on profit. They also consider their impacts on society and the environment. A good lens to view impact through is the UN’s Sustainable Development Goals.
We like the 5 Stages of Corporate Ethical Development. We like concept of organisational morality and think when organisations behave in an ethical way that they benefit both themselves and society. Though we like the model, we’re not totally sure though that it’s right to separate the morality of the organisation from that of the individuals in leadership positions. We know this happens de-facto, given that our organisations predominantly have their own legal identities, but we’re still not certain it’s a good thing.
Whether or not we like the separation of organisations from their leadership, we do like the five stages of morality that are described in this model. We believe that the more people are aware of the moral actions of organisations, the better. This increased awareness of organisational morality should help individuals make better consumption choices.
Our High Horse…
Ultimately, it is our view that as long as companies focus on maximizing shareholder returns, that morality will only enter strategy when that morality is considered to contribute to current or future profitability. This is exactly as things should be under our current paradigm. We, though, believe that new legal frameworks would support increased morality in our organisations, enabling a shift from shareholder capitalism towards stakeholder capitalism, and allow them to make a greater contribution towards better futures for humanity.
Though the model does not specifically call it out, we firmly believe that environmental considerations are hugely important from an ethical and moral basis. We want to call out our view that as a matter of morality, many organisations can and should do more to reduce their environmental impact. In fact, we think many organisation should strive to become not simply neutral, but to become net contributors to our global environmental wellbeing.
At its core, we think it’s pretty simple. organisations should cover the costs associated with the negative externalities they produce. Lots of significant reports seem to come back to this. And this is where regulation comes in, if you’re of that mindset. If you’re other another mindset, then the belief is that another commercial entity will find profit in fixing those externalities so regulation is unnecessary, we suppose.
Sources and Feedback
This post is based on original work by Donal Robin and Eric Reidenback as published in the Journal of Business Ethics. For more details, you can access their article: “A conceptual model of corporate development”. “A conceptual model of corporate development”. The original work behind this topic was completed by the American Psychologist David McClelland. You can read more about it specifically in his 1961 book: The Achieving Society.
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