Why Ethics Matters

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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 profitable, more rational, and more intrinsically valuable than injustice, and that this is particularly true for business organizations. The research on prisoners' dilemmas and social dilemmas shows that ethical behavior is more profitable and more rational than unethical behavior in terms of both the negative sanctions on unethical behavior when interactions with stakeholders are iterated, and the positive rewards of habitually ethical behavior when stakeholders can identify those who are predisposed to be ethical. In addition, the psychological research on justice shows that justice is intrinsically valued, both from an outcome and from a process perspective, and so crucial for business organizations, particularly in terms of organizational effectiveness.

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n 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 and Stevenson are not the first to suggest that unethical behavior may be more profitable than ethical behavior. Over two thousand years ago, exactly the same claim was made by Thrasymachus, a character in Plato's Republic who concluded that while justice is for the simpleton, injustice is for the wise: [Socrates:] Well, then, Thrasymachus... suppose you begin at the beginning and answer me. You say that being perfectly unjust 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 show that Thrasymachus is wrong, that injustice is neither more profitable nor more rational than injustice. In their article, however, Bhide and Stevenson are on the side of Thrasymachus. 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.

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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 the readers of the Harvard Business Review might not be up to plowing through tables of numbers and statistics. Instead, what they provide are anecdotes and snippets of conversations taken, apparently, from their interviews with a variety of business people. These business people describe incidents where dishonesty or broken promises paid off and several are quoted as saying that many businesses "cavalierly break promises" yet suffer no sanctions. What Bhide and Stevenson's interviews clearly demonstrate is that many business people feel that unethical behavior in business often pays off. But it is difficult to see what more we are supposed to leam from these stories and quotations since they seem to tell us what we already knew: that wrongdoing sometimes 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 systematic advantage to ethical behavior or any kind of systematic disadvantage to unethical 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 a business organization or business person, has to gain from just behavior or is injustice truly more profitable? Like Bhide and Stevenson, however, I will address this question by appealing to some very unPlatonic empirical data. Plato, as is well known, had a profound distrust for empirical evidence. In what follows I will set aside this Platonic distrust for the empirical and base much of what I say on empirical research findings. A major aim of this essay is to call attention to this empirical research and to suggest its relevance and importance to 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 say something about why the question arises and why, as Bhide and Stevenson's interviews show, so many business people feel that ethics is for suckers. Philosophers—Immanuel Kant, for example—have often divided moral norms into two groups: those that impose duties toward others and those that impose duties toward the self.^ Norms of temperance, moderation, integrity, prudence, industriousness, and chastity, for example, are self-regarding, while norms of honesty, generosity, trustworthiness, justice, and kindness are other-regarding. Norms that impose duties toward the self are often justified in terms of the future or long-term benefits they confer on the self and so it is fairly easy to explain to a person 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 who behaves temperately is more likely to avoid being controlled by her passions and appetites 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 destroy peace and harmony. Self-regarding norms, then, are justified because obedience to self-regarding norms, although they may require foregoing immediate gratifications, will nevertheless confer more important long-term benefits on the self.

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Self-regarding norms matter to us, then, because the benefits they confer are benefits that matter to us. Other-regarding norms, however, are not so easily justified and so it is not so obvious why they should matter to us. As philosophers from the time of Aristotle have remarked, other-regarding norms directly confer benefits on others. As Aristotle notes, "Justice is thought to be 'another's good', because it is related to our neighbor; for it does what is advantageous to another [and] Justice in this sense, then, is not part of virtue but virtue entire."^ Other regarding norms, then, which impose duties toward others, raise what is perhaps the classic question of ethics: why be moral? Why should a person take an interest in justice when justice benefits others and not the self? This question is particularly acute in business organizations. Business organizations are deliberately structured to advance the interests of their owners through profit-optimizing behaviors. Western social ideologies not only legitimate but promote this self-seeking behavior in business; Western legal institutions are designed to protect and support profit-optimizing organizations; and the economic institutions of industrialized nations are built on the idea that business behavior is self-interested. Why then should business organizations or their managers take an interest in ethical norms that impose duties toward others? Since business organizations are specifically designed to advance the interests of owners through profit-optimizing behaviors, since such self-interested profit-optimizing behavior is legitimized by ideology, by law, and by economics, why should business organizations pursue ethical norms that advance the interests of others, often at the cost of foregoing profitable opportunities? In this essay, then, I attempt to update Plato's project of justifying other-regarding ethical norms, particularly as these affect business organizations. I will do this by describing several avenues of research on ethics and their relationship to the management of business organizations. I will try to show that although justice is other-regarding, it nevertheless confers benefits on the organization and the individual that are akin to the benefits that Plato attributed to justice. Moreover, I will argue, these benefits are benefits that matter greatly to profit-oriented self-interested economic agents. I will begin by looking at what are now called 'Prisoners Dilemmas" or, more generally, social dilemmas, a topic that has been intensely researched in recent years, although it has been a topic of discussion by ethicists for hundreds of years.^ I will then turn to recent investigations into responses to injustice, also a topic that has been subjected to a fluiTy of recent research although long a standard topic of interest to moral philosophers.

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

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off if everyone adheres to norms of justice. People consequently agree to cooperate in mutual adherence to norms of justice. However, each individual knows that he would be better off if he personally defected from following the norms that everyone else is following, "For no man who is worthy to be called a man would ever submit to such an agreement if he were able to resist; he would be mad if he did."' In this account, justice is characterized as creating the kind of situation that contemporary game theory calls a "prisoners dilemma."* Prisoner's dilemmas are 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. If both cooperate, they will both gain some benefit. If both defect, neither gets the benefit. If one cooperates while the other defects, the one who cooperates suffers a 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 Defect A \ Coop

\ Coop

-1,-1

+2,-2

+2,-2

+1,+1

The prisoner's dilemma gets its name from a story that is supposed to illustrate the kind of situation it represents. The story goes like this: Two thieves arrested for a crime vow not to betray each other. But the police put them in separate rooms, and tell each thief the same thing: "If your partner confesses and you keep silent, he goes free and you get 5 years in prison; if you confess and he keeps silent, you go free and he gets 5 years in prison. If you both confess, then you both get 3 years in prison. If you both keep silent, then we'll give you each 1 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, as early inquiries in game theory showed, if the parties are rational and self-interested, they will both choose to defect. Each party will reason as follows: "The other party will either cooperate or defect. If the other party cooperates, I will gain more by defecting than by cooperating; and, if the other party defects, I will also gain more by defecting than by cooperating. In either case, I will be better off by defecting than by cooperating." Since both parties reason in this self-interested way both end up defecting, and thus both end up losing out. Prisoner's dilemmas, in short, are situations in which the self-interested behavior of two parties leaves both worse off than cooperative behavior would.

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Although prisoner's dilemmas technically involve only two parties, their lessons can be generalized to what are more accurately called "social dilemmas," situations in which several parties each face a prisoner's dilemma situation with respect 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. But each member knows that if the others stick to the agreement, he has more to gain by selling the commodity at a lower price, while if the others do not stick to the agreement, he will also be better off selling at a lower price. Since all will reason this way, the cartel breaks down, prices fall, and all the members of the cartel end up worse off than if they had cooperated in the agreement. Studies have indicated that large groups in a social dilemma are rarely able to secure cooperation, especially if they expect not to interact frequently, ^o Prisoners dilemmas, in the form of social dilemmas, mirror many of the kinds of social situations with which our lives are filled, i.e., situations in which several people have a choice between cooperation or non-cooperation and in which the self-interested pursuit of non-cooperation leaves all worst off than cooperation. In addition to cartels, such situations include contracts and agreements or promises, honor systems, market competition, military arms races, the game of chicken, the provision of public goods, the "NIMBY' ("Not In My Back Yard") syndrome, the consumption of unowned resources, the free rider phenomenon, and, of course, ethics. Ethical norms can be interpreted as norms that put us in a prisoners' dilemma situation. For example, when two individuals talk with each other, they have a choice of cooperating in the norm of telling the truth, 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 in the norm of keeping their word, or they can try to take advantage of each other by breaking the agreement. When individuals who each own a piece of property interact, they have a choice of cooperating in the norm against theft, or they can try to take advantage of each other by stealing each other's property. Being ethical, then, can be thought of as a kind of cooperation between individuals: it is cooperating in the moral norms that sustain our fundamental institutions such as 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 take advantage of others by breaking the moral norms that others are following. Seeing ethics in terms of the prisoner's dilemma suggests an explanation for two common observations business people make about ethics. First, business people often acknowledge that the business world would be a better place if everyone behaved ethically. This is what the prisoner's dilemma analysis of ethics would suggest since mutual cooperation in the norms of ethics is mutually beneficial; in particular we all gain the benefit of stable social institutions and an orderly and flourishing society if everyone cooperates in the moral norms that sustain these. But, secondly, business people just as often suggest, as Plato's Thrasymachus did, that ethical behavior in business is for suckers. And this.

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again, is what the prisoner's dilemma suggests since the person who sticks to ethics will lose out when she encounters a person who takes advantage ofher by being unethical. The ethical person, then, is in a prisoner's dilemma and so appears 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 that when individuals deal with each other in a prisoners dilemma situation, it is in each person's individual interest not to cooperate but to try to take advantage of the cooperation of the other party. Why, then, are people ever ethical? If, as Thrasymachus suggests, injustice pays off, why are people ever just? The Prisoner's Dilemma analysis raises in very stark form the question with which we began: why be ethical if getting away with being unethical pays better than being ethical? Part of the explanation for why ethics matters lies in an unreal assumption we have so far been making. We have assumed that the people who meet in a prisoners dilemma interact with each other only once. In fact, as the prisoners dilemma analysis of ethics suggests, unethical behavior will pay off in a onetime meeting when the person who is taken advantage of cannot get back at the person who took advantage of her. This is perhaps the reason why ostensibly unethical behavior emerges in those exchanges in which parties interact only once, such as in the sale of cars or other big-ticket items, or exchanges in which the parties cannot identify each other, such as in freeway driving. However, the situation is quite different when interactions are iterated and are between individuals who are known to each other; for example, when individuals have to deal with each other repeatedly or have on-going relationships with each other. When individuals can identify each other and have to deal with each other in repeated prisoner's dilemma situations, those who continue to try to take advantage of the other party can be made to suffer sustained losses, while those who 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 other repeatedly, of course, is that when one party takes advantage of the other in one interaction, the injured party remembers this and can retaliate by doing the same in the next interaction. Through mutual retaliation, the parties can enforce cooperation, and a stable pattern of mutual cooperation can emerge. This phenomenon has been extensively studied in contemporary game theory. Axelrod, in particular, has shown that in a series of repeated prisoners' dilemma encounters, the best strategy—called TIT FOR TAT— is for a party to cooperate initially but to retaliate with non-cooperation each subsequent time the other party fails to cooperate.'' Because of this continuous threat of retaliation, it is more rational for the parties to a series of repeated exchanges to cooperate with each other than to fail to cooperate. And cooperation, of course, brings with it the mutual advantages of mutually beneficial activities. Thus, where individuals have to deal with each other repeatedly, and where the threat of retaliation is present, it is better to cooperate with the other party than to try to take advantage of them.

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The implications of the prisoners' dilemmas research for ethics in business are fairly clear. Business interactions with its stakeholders—employees, customers, suppliers, creditors, and stockholders—are usually repetitive and on-going.'^ Consequently, if a business attempts through unethical behavior to take advantage of these or other stakeholders in today's interaction, they can usually find some way to retaliate against the business in tomorrow's interaction. The retaliation can consist of as simple an act as refusing to buy from, work for, or do business with the unethical party; or it may be a more complex form of retaliation such as sabotage, absenteeism, pilferage, organizing boycotts or other forms of getting others to refuse to do business with the unethical party, or getting even by inflicting other kinds of covert or overt injuries. Simply put, it is shortsighted for management to try to take advantage of these groups through unethical behavior. It is possible for a business to sometimes get away with unethical behavior, but in the long run, if interactions between identifiable parties are iterated and retaliation is a realistic option, unethical business behavior tends to he unprofitable and non-rational, while, ethical behavior will reap the rewards of mutual cooperation. Although the threat of retaliation in repeated interactions goes some way toward explaining why ethics matters in business, still the explanation does not take us very far in making ethics more appealing. This is because the explanation assumes a negative motivation for ethical behavior. In effect it says that ethics is preferable because unethical behavior is punished. This provides a negative incentive for avoiding unethical behavior, but does not show that ethical behavior is itself an attractive option. A more satisfying justification of ethics would show that ethical behavior itself is desirable because it is beneficial. In fact, that was Plato's hope in the Republic. Plato aimed to show that ethical behavior was not merely a lesser evil, to be preferred over the greater evils that unethical behavior entailed, but that ethical behavior itself was advantageous. In fact, a more positive explanation of why justice matters can be found in the work of the economist Robert Frank, Frank's research, like the prisoners' dilemma research, looks at situations in which people have a choice between cooperating with or taking advantage of others.^^ Frank's analysis, however, is aimed at investigating whether it is better for a person to habitually cooperate with others or to habitually take advantage of others, when that person is living in a population of people some of whom habitually cooperate and some of whom habitually take advantage of others. Since, as I have argued, ethics is a kind of cooperation in the rules that support our fundamental social institutions, the question comes down to this: is it better to be habitually ethical or unethical in a society that consists of both ethical and unethical people? Plato, in the Republic, answered this question in the affirmative, arguing that the person who is habitually just will enjoy important reputational benefits. '^ Frank's studies provide ingenious support for Plato's claim that ethical behavior is itself beneficial. Frank uncovered two important facts about human be-

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havior. First, he found that people send fairly reliable signals to each other regarding whether they habitually cooperate in keeping to rules and agreements, or whether they habitually attempt to take advantage of others. Signals of one's predisposition to be cooperative include visual cues such as facial expressions, auditory cues such as tone of voice, and past history such as is embodied in reports from others and in reputation. Frank's studies showed that people can accurately identify cooperative predispositions about 75 percent ofthe time, and can accurately identify non-cooperative predispositions about 60 percent of the time. Secondly, Frank's studies showed that when people interact with each other and can choose the persons with whom they interact, they more often choose to interact with those whom they believe habitually cooperate in the rules of ethics and 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 unethical predispositions, and the tendency to seek out those who are ethical and avoid those who are unethical—imply that it is more advantageous to be habitually ethical than unethical. Because ethical people seek each other out and avoid unethical people, they will tend to increase the frequency of their dealings with each other. Ethical people will therefore increase the frequency with which they engage in mutually cooperative and thus mutually beneficial exchanges. On the other hand, unethical people will be avoided by ethical people and so they will be forced to deal with other unethical people. As a result, unethical people will tend to increase the frequency of their dealings with each other, and in these dealings each will try to take advantage of the other in a mutually destructive exchange. Frank's conclusion is that habitually ethical people will more often have mutually advantageous relationships with other ethical people while habitually unethical people will more often have mutually destructive relationships with other unethical people. In the long run, it turns out that habitually ethical people end up with larger gains than habitually unethical people. Frank's research has clear implications for ethics in business. His findings imply that employees, for example, have fairly reliable ways of discovering whether a manager or even a team of managers is habitually ethical or unethical. His research implies, further, that given the choice ethical employees will tend to seek to deal more with those whom they identify as ethical than with those who are unethical: that is, ethical employees will tend not to enter or to exit organizations when they learn those organizations are staffed by managers who deal unethically with their employees, and they will tend to enter and remain loyal to organizations staffed by ethical managers. Unethical managers, on the other hand, will be left with the unethical remainder. Consequently, over the long run and for the most part, ethical managers will tend to have mutually cooperative interactions with ethically reliable employees and together with them will create mutually beneficial corporate enterprises, while unethical managers will more often tend to find themselves in mutually destructive interac-

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tions with unethical employees and together with them create dysfunctional enterprises.'5 Habitually ethical management is more advantageous over the long run, than habitually unethical management. The prisoners' dilemma research is thus fairly supportive of the Platonic view that adherence to other-regarding norms of ethics confers benefits on the agent. First, adherence to other-regarding norms avoids injurious retaliation in on-going relationships with customers, employees, suppliers, and creditors. Second, habitual adherence to other-regarding norms will increase the frequency with which managers will find themselves in mutually beneficial interactions with ethical employees, while habitually unethical behavior will increase the frequency with which managers will find themselves in mutually destructive relationships with unethical employees. These results, however, are still not very satisfying, and Plato, particularly would find them unpalatable. The research we have reviewed so far suggests that over the long run unethical behavior in iterated exchanges tends to be punished and ethical behavior tends to be rewarded. So ethics is here being motivated by external rewards and punishments. The prisoners dilemma research takes an instrumental view of ethics; ethics is to be pursued because of its instrumental value in securing other goods and avoiding other evils. In this approach, ethics is not desired for itself, but for its accompaniments. But Plato had a more ambitious aim: His aim was to show that ethical behavior is intrinsically desirable. Is it possible to show that ethical behavior is desirable not because 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 current research on ethics. This is the psychological research on how people respond to justice and injustice. This research, I believe, suggests a view of ethics—or at least of that portion of ethics that we refer to as "justice"—that is more in keeping with the view of Plato. Plato, as I noted, rejects the instrumental conception 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 psychological research on justice support Plato? Psychological research on justice originated in this century in the theories of George C. Homans'' which J. S. Adams'* adapted for his research on how workers respond to unfairness in the work place, in particular to inequity in compensation, a form of distributive justice. (Distributive justice refers to the fairness of the way in which benefits and burdens are distributed among the members of a group.) Adams hypothesized that a worker compared the compensation he receives for the work he does to the compensation other similar workers 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 perceive their situation as just or equitable. However, if a worker believes that he

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or she is being paid less than others for a comparable amount of work, or if the worker believes he or she is being paid more than others for a comparable amount of work, the worker will regard the situation as unjust and will take steps to reestablish justice. Interestingly, this definition of justice is exactly the same definition that Aristotle proposed several centuries earlier. ^^ Adam's own studies and those of other researchers strongly supported his hypothesis.^*^ Workers do in fact compare the proportion between the pay they receive and the work they do to the proportion hetween the pay and work of other similar workers, and they take steps to change things when they believe their compensation is unjust. In particular, workers who believe they unjustly are being paid more than others will feel guilty and will work harder, while workers who believe they unjustly are being paid less than others will feel angry and will lower their performance or take other action such as complaining to supervisors, sabotage, or finding another job. Distributive justice matters to workers. Adam's theory was generalized and extended beyond work situations to apply to all social interactions by Elaine Walster and her associates.^' Walster theorized that societies evolve norms of justice and induce their members to accept and follow these norms. Societies generally reward their members when they treat others justly, and punish those who treat others unjustly. Individuals who are treated unjustly or who see others being treated unjustly, will become distressed and they will attempt to eliminate their distress by engaging in actions aimed at restoring justice.^^ Like Adams, Walster defined justice as obtaining when the proportion perceived to obtain between a person's contribution to a group and her rewards from the group equals the proportion perceived to obtain between other people's contributions and their rewards. In a series of studies Walster and her associates found plentiful evidence supporting her view that individuals in all social situations will react to injustice with distress and will attempt to eliminate their distress by restoring justice. Walster emphasized, however, that individuals may attempt to relieve their distress either by altering the actual situation, or by altering their perception of the situation. If it is called to a worker's attention, for example, that he or she gets less pay than others for working the same hours they do, the worker may attempt to alter his or her situation by demanding more pay. However, if the worker is not in a position to do anything about the situation, the worker may instead respond by deciding that in spite of appearances the other workers are really contributing more than he or she, perhaps because they must be working harder or because their work is of a higher quality. In short, when people perceive 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 be more just.^^ Further psychological research on distributive justice amended Walster's findings in two important directions. First, researchers found that under certain conditions people respond to injustice by neither changing their situation nor by

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changing their perceptions hut hy doing nothing. In particular, people will respond to injustice hy doing nothing when the injustice is attrihuted to unintentional hehavior, or to environmental causes, or to a temporary aherration.^^ People's responses to injustice are also affected hy the extent to which they helieve they are personally responsihle for the injustice, hy their ahility to correct the injustice, and hy the costs of acting to remedy the situation.^^ Secondly, and more importantly for our purposes, researchers found that the principle of proportionality is not the only principle of distrihutive justice that human heings recognize and emhrace. Researchers have found three main norms of justice to which people respond: (1) The principle of proportionality or "equity" that says that rewards are just when they are proportional to each individual's contdhution—the principle of distrihutive justice originally hypothesized hy Aristotle and investigated hy Adams and Walster—; (2) the equality principle which says that rewards are just when all individuals are given equal rewards; (3) the need principle which says that rewards are just when allocated according to individual need.^^ Studies hy M. Deutsch, T. Schwinger, and others indicate that people see the principle of contrihution as appropriate when they are working in groups where relationships are impersonal and competitive or where goods are produced hy independent work as in piecework johs.2'' Interestingly, use of the principle of proportional justice to allocate rewards in organizations tends to promote an even more competitive atmosphere in which resources and information are not shared and in which status differences emerge^* On the other hand, people seek to he treated according to the principle of equality when working in groups that exhihit solidarity and where tasks require cooperation. And, again interestingly, use of the equality principle in groups tends to increase solidarity and harmony among group memhers and to enhance cooperative activities.'^ Finally, people tend to recognize the principle of need when working in groups whose memhers exhihit high levels of interpersonal attraction and the shared goal of promoting each other's welfare. Although use of the need principle may enhance a group's emotional honds, it is also possihle that memhers who are given goods hecause of their need may see this as humiliating and so avoid it.'^ The research on distributive justice ohviously shows that justice matters to people and that people are motivated powerfully hy specific forms of distrihutive justice in specific contexts. But does the research support Plato's view that justice is desired for itself?^' A numher of studies examining the conditions under which the various principles of justice are favored, suggest that even when workers will get less compensation by insisting on adherence to a particular principle of distributive justice, they still demand adherence to that principle if they feel it is appropriate for their situation.^^ Less productive workers, for example, working at competitive tasks for which proportional justice would he the appropriate standard of compensation, will demand proportional justice even though this means they personally will get paid less than if they demanded justice of equality. And highly productive workers in cooperative tasks for

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which an equal distribution of rewards would be appropriate will demand justice of equality even when this means they will get paid less than if they demanded proportional justice. These studies suggest that workers see adherence to the appropriate principle of distributive justice as intrinsically desirable entirely apart from the personal advantages (or disadvantages) of that form of distributive justice (although personal advantage always remains a competing motivator). A similar conclusion is indicated by studies of the extent to which people will choose justice over self-advantage. In one set of experiments two subjects are gratuitously given a sum of money to divide between themselves.^^ The first subject decides how the money will be divided between the two without any input from the second subject, who, however, gets to decide whether the two will get the money at all. Since neither person has done anything to merit a larger share of the money, the appropriate principle of distributive justice is that of equality. And, in fact, in most experiments the first subject tended to divide the money more or less equally, suggesting a desire for distributive justice that outweighed the desire to take a much bigger share. Moreover, when the division of money was extremely unequal, the second subject usually rejected the offer even though this meant foregoing whatever money they would have received. Thus, distributive justice matters a great deal to people, and a large proportion even will forego gains to themselves for the sake of justice. In an even more convincing experiment, the second person was given no choice in the matter at all, so that the first person both determined the division of money and decided whether to take the money.^* Surprisingly, although the subjects making the division 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 forego personal gains for the sake of justice. The research on distributive justice, then, suggests that people desire distributive justice for itself and not merely for its external advantages and that this desire is a powerful motivating force, often, but not always, even overriding personal advantage. This conclusion has important implications for profit-oriented business organizations, particularly insofar as the research shows that people's desire for justice will motivate them to take steps to ensure that justice prevails, even when this means foregoing advantages to themselves. It must matter to businesses, for example, that employees seek distributive justice in compensation and work assignments, and will take steps to ensure that work burdens are justly proportionate to compensation. In particular, if employees believe they are not being paid enough for the work they are doing in comparison to others, they will likely adjust their work output downward, perhaps by putting forth less effort, perhaps by taking days off from work, or perhaps by otherwise lowering their productivity.^^ People outside a business will also react negatively to violations of distributive justice in ways that must matter to a business. Customers, for example, will turn against a company if they believe that it is unjustly charging more than it should for a product, as may happen, for example, when an essential commodity is in very short supply.^^ Finally, it must

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matter to business that task performance is affected by the kind of distributive justice that prevails in an organization; compensation systems based on the principle of contribution create a competitive atmosphere in which resources and information are not shared, while compensation systems based on the principle of equality encourage cooperation and the sharing of resources and information. Clearly, then, distributive justice is intrinsically valuable to the employees, customers, and others with whom businesses deal, and for this reason it has to matter to businesses. But we have not quite made the full case for justice, at least as Plato would have 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's deepest defense of justice is based on the idea that justice is intrinsically valuable because it consists of an order and harmony among the members of a group that is itself intrinsically desirable. As he puts it early in the Republic: "injustice creates divisions and hatreds and fighting, and justice imparts harmony and friendship."^^ Does contemporary psychological research on justice support the view that justice is intrinsically desirable because it is constitutive of a harmony and order that is intrinsically desirable? To answer this question, I want to turn to examine one final direction in which the research on justice has expanded. The early research on justice that we just examined (by Adams, Walster, and others) focused on the fairness of outcomes and not on the fairness of the processes by which these outcomes were determined. In short, it focused on distributive justice, not on procedural justice. Recent research on justice has looked more closely at the fairness of procedures of allocation and distribution, such as grievance procedures, courtroom practices, evaluations of students, employee performance evaluation, the methods by which wages are set, the processes through which people are hired, fired, and promoted, the processes through which organizational decisions are made, and more generally, any decision-making process that results in the allocation of benefits or burdens. Do these studies of procedural justice shed any additional light on the intrinsic desirability of justice in business organizations? The first studies on procedural justice found that dispute resolution processes in which the parties to a dispute are allowed to provide their own input into the process 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 participants.^^ Indicative of this was the fact that when decisions were made through processes that allowed for direct input, the decisions that emerged from the process were embraced and accepted as legitimate by the affected parties, to an extent not present when exactly the same decisions were made through processes that did not allow such input."^" Moreover, subsequent studies in a variety of social contexts showed that decision-making processes and institutions that allow affected parties direct mput into the process, are judged to be more just than those which don't, and that such just processes and institutions.

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as well as the decisions reached through them are more likely to be accepted by affected parties, more likely to be seen as legitimate by the parties involved, and more likely to be complied with by the parties involved.'*' Studies of workers, for example, have shown that when a system of employee evaluation allows workers to express their viewpoints and feelings and to communicate information about themselves and their work, they judge it to be more fair and are more likely to be satisfied with the process and more acceptant of their final evaluations regardless of whether the evaluations are low or high."*^ Other studies have shown that employee evaluation systems are also judged as fair and valued when they are consistent and they communicate and rely on accurate information, factors that also contribute to acceptance of, and compliance with, processes and their outcomes."*^ Some experimental models have suggested that the fairness of procedures is further determined by the extent to which they provide: adequate methods of selecting decision-makers, adequate procedures for setting and communicating the ground rules that will determine rewards, suitable methods of gathering and communicating the information on the hasis of which the rules are applied, suitable decision-making mechanisms in the application of rules, safeguards against the abuse of power, procedures for appeals, and mechanisms for change that can represent the concerns of all participants.'*^ The research on procedural justice has provided a number of additional indications that organizational participants respect and attribute intrinsic value to processes that are just. One set of studies showed that when employees feel that an organization's decision-making processes are just they exhibit lower levels of turnover and absenteeism, and higher levels of trust and commitment to the organization and to its management.''^ And when employees believe an organization's decision-making processes and procedures are just, they are more willing to follow organizational leaders, more willing to do what they say and more willing to see their leadership as legitimate."*^ In short, employees become committed to the just organization and remain loyal to it and willing to accept and follow its leaders. On the other hand, employees are repelled by the unjust organization and respond to organizational injustice with disaffection, disloyalty, and resistance to organizational leaders and their commands. Organizations constituted of decision-making processes that are just, then, are valued by participants and endowed with respect. But is there any direct empirical evidence that just organizatonal procedures are valued for themselves instead of merely for the benefits they instrumentally provide their members? This is an extremely difficult question to answer with certainty, since it is possible that people value just processes because at some level they believe that just processes are likely to provide them with larger rewards than unjust ones. Nevertheless, there are some studies that indicate that people place some value on just procedures that is independent of the extent to which such procedures personally benefit them."*' Although certain studies have shown that just procedures have instrumental value for their participants, these same studies have demonstrated that just procedures are also imbued with noninstrumental or

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intrinsic value."** For example, in one study, two groups of workers were both allowed to say what they thought would be an appropriate amount of work to perform in a given time.'*' But while the amount of work for one group was adjusted in accordance with their input, the other group was told that although their input was being solicited, the amount of work they had to do had already been decided and their input would have no effect on the amount of work they would be asked to perform. A third, control group, was not allowed even to say what they thought would be an appropriate amount of work, and their work was simply assigned to them. Not surprisingly, this third group did not judge this process to be particularly fair. But the other two groups, even those who knew their 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 their instrumental value. It has been suggested, in fact, that procedural justice is desirable not for its instrumental value, but because it communicates that those who 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 desirable because it creates an intrinsically desirable organizational order, an order that communicates value, respect, and dignity, and so an order which elicits trust, organizational commitment and loyalty, which leads participants to attribute legitimacy to the organization's leaders and their decisions, and which leads participants to accept and implement organizational decisions. When an organization is constituted of processes that are seen as just, participants in the organization cleave to the organization itself: they embrace it, respect it, and are intensely loyal to it and its leadership. This research on procedural justice has highly significant implications for business organizations. Simply put. organizations that are comprised of processes that are just are better organizations in that they function better than those that are not. This point can be made clearer in terms of the concept of organizational effectiveness. Organizational effectiveness has been variously defined as (1) an organization's ability to attain its goals, (2) its ability to secure needed resources from its external environment, (3) the quality of an organization's internal processes and information, and (4) an organization's ability to at least minimally satisfy all of its strategic constituencies, including suppliers, consumers, employees, and so on.^' The research on procedural justice demonstrates that procedural justice has a positive impact on each of these elements. Procedural justice enhances an organization's ability to attain its goals because when organizational decision-making processes are just, they impart a legitimacy to the organization leaders and acceptance of their decisions that enables them to lead the members ofthe organization toward its goals. Procedural justice enables the organization to secure and keep that most strategically important resource: committed employees; when just procedures are an embedded part of an organization, the organization commands the respect, trust, and commitment of current and prospective employees. Procedural justice enhances the organization's in-

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temal processes and channels of communication by creating organizational cohesion and harmony that translate into a cooperative willingness to work together, communicate fully and openly, and share information and resources. And procedural justice enhances an organization's ability to minimally satisfy its strategic constituencies because its constituencies will perceive the share of organizational resources allotted to them as fair and acceptable. In sum, procedural justice is essential for organizational effectiveness. And, surely, nothing can matter more to a business organization, whatever its strategic goals, than the fundamental means to those goals: organizational effectiveness.

Conclusion We have argued, then, that Plato was right: justice is more profitable, more rational, and more intrinsically valuable than injustice, even in business. The research on prisoners' dilemmas shows that ethical behavior is more profitable and more rational than unethical behavior in terms of both the negative sanctions on unethical behavior and the positive rewards of ethical behavior; and the psychological research on justice shows that justice is intrinsically valuable, both from an outcome and from a process perspective, and so crucial for business organizations, particularly in terms of organizational effectiveness. There is, 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 which morale is high and in which members are motivated to work harder and more productively at achieving organizational goals, and reason to suspect that the justice of an organization bears some significant relationship to its stability, i.e., its ability to maintain its essential functions through periods of stress and in turbulent environments.'^ But enough has been said to show that Plato was correct and that Thrasymachus and his modern counterparts are wrong. Ethics in general and justice in particular matter tremendously for the profit-oriented self-interested business organization.

Notes 1. Amar Bhide and Howard H. Stevenson, "Why be Honest if Honesty Doesn't Pay," Harvard Business 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, many translations 4. Something that Kant points out in his Groundwork ofthe Metaphysics of Morals, section two. 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

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suffered injustice and have had experience of both, not being able to avoid the one and obtain 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 termed by them lawful and just. This they affirm to be the origin and nature of justice;—it is a mean or compromise, between the best of all, which is to do injustice and not be punished, and the worst of all, which is to suffer injustice without the power of retaliation; and justice, being at a middle point between the two, is tolerated not as a good, but as the lesser evil, and honored by reason of the inability of men to do injustice. For no man who is worthy to be called a man would ever submit to such an agreement if he were able to resist; he would be mad if he did. Such is the received account, Socrates, of the nature 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 of Michigan Press, 1965). 9. For a non-technical and fascinating overview of the history and significance of prisoner's dilemma research, see William Poundstone, Prisoner's Dilemma (New York: Anchor Books Doubleday, 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); an earlier and more compact summary of the computer studies Axelrod carried out is in Robert Axelrod, "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 and empirical research on iterated Prisoner's dilemma, see Robert Axelrod and Dougliis Dion, 'The Further 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 any individual or group that can affect and be affected by the operations of a firm, and so can be said to have a "stake" in what the firm does See R. E. Freeman, Strategic Management: A Stakeholder Approach, (Marshfield, MA: Pitman, 1984). As the prisoners' dilemma analysis that follows suggests, stakeholder power to affect the operations of the firm coupled with the likelihood of repeated interactions makes it both irrational and unprofitable for the firm to behave 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 telling their 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 reputed just 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 organizational change that would identify some of the specific organizational processes through which organizations that train, condone, or allow dishonest practices toward chents, customers, vendors, and distributors, gradually filter out ethical employee behavior and increase the levels of unethical organizational behaviors. His model, labeled the "triple tumor structure of organizational dishonesty," suggests three organizational consequences of dishonest practices. 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 advantage of customer gullibilities or vulnerabilities. This initial introduction of dishonesty into the

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operations of the firm may yield short-term profits. However, the dishonest treatment of outsiders will ultimately result in a damaged company reputation, lower levels of return business, and lower long-term profits. Secondly, the company's initial commitment to dishonest practices will then start to generate a mismatch between the values of the company and the values of honest employees. The mismatch will lead honest employees to leave the company, 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 well in and for the company, will be employees whose values match the dishonest values of the company, i.e., dishonest employees. Over time the number of honest employees will decline while the number of dishonest employees will rise, leading to an increase in levels of company dishonesty. Thirdly, in order to cope with the rising levels of dishonesty, the company will begin to implement auditing systems, inventory checks, and security systems. Company use of such surveillance systems, however, will be read by employees as evidence of the company's lack of trust in them, which will in turn create an adversarial atmosphere and declining levels of voluntary employee cooperation. In addition, the use of surveillance systems will create a perception among employees that they are expected to perform well when under surveillance, but to feel justified in cheating when the surveillance systems can be tricked or escaped. And, finally, the use of surveillance systems will lead managers to believe that it is these systems that cause employees to be honest and this belief will lead them to install more and increasingly sophisticated systems. The use of ever more surveillance, however, will lead to ever declining levels of trust and ever rising attempts to cheat the systems, which in turn will motivate the use of additional surveillance. Gradually, then, the dishonesty initially introduced 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 "Conference on Behavioral Research and Business Ethics," Center for the Study of Ethical Issues in Business, Kellog'Graduate School of Management, Northwestern University, Chicago, July 31, 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 we welcome for their own sakes, and independently of their consequences, as, for example, harmless pleasures and enjoyments, which delight us at the time, although nothing follows 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 are desirable 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 —^these do us good but we regard them as disagreeable; and no one would choose them for their own sakes, but only 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 happy desires 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 the troublesome class, among goods which are to be pursued for the sake of rewards and of reputation, but in themselves are disagreeable and rather to be avoided. I know, I said.

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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 Social Psychology, vol. 67, (1963), "Inequity in Social Exchange," in L. Berkowitz (ed.). Advances in 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 (New York: Academic Press, 1976), pp. 43-90. 19. Aristotle, Nicomachean Ethics, [c. 330 B.C.], translated by David Ross, (London: Oxford University Press, 1966), p. 1131 20.1. R. Andrews, "Wage Inequity and Job Performance: An Experimental Study," Journal of Applied Psychology, vol. 51, (1967), pp. 39-45; J. S. Adams & S. Freedman, "Equity Theory Revisited: 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 Performance: A Test of Equity Theory with a New Induction Procedure," Journal of Applied Social Psychology, vol. 3 (1973), pp. 325-334; J. Greenberg, "Approaching Equity and Avoiding Inequity in Groups and Organizations," in J. Greenberg & R. L. Cohen (eds.). Equity and Justice in 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 Worker Performance 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," Journal of Personality arui Social Psychology, vol. 25 (1973), pp. 151-176; Elaine WaJster has also written 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 perceptions to make the world appear to them to be more just, see Melvin J. Lemer, The Belief in a Just World (New York: Plenum Press, 1980). 24. M.K. Utne and R.F. Kidd, "Equity and Attribution," m Gerold Mikula (ed.). Justice and Social Interaction (New York: Hans Huber Publishers, 1980), pp. 63-94. 25. S. Schwartz, "Normative Influences on Altruism," in L. Berkowitz (ed). Advances in Experimental 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.). Justice and Social Interaction (New York: Springer-Verlag). pp. 25-61. 26. M. Deutsch, "Equity, Equality, and Need. What Determines Which Value Will Be Used as 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 Social Issues, vol. 31 (1975), pp. 45-64. 27. M. Deutsch, Ibid., T. Schwinger, "Just Allocations of Goods: Decisions .Among Three Principles," in Gerold Mikula, ed.. Justice and Social Interaction (New York: Springer-Verlag New York, Inc., 1980), pp. 95-125; Gerold Mikula. "On the Role of Justice in Allocation Decisions," in ibid., pp. 127-66

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28. Deutsch, 1975; Sampson, 1975.Leventhal, 1976; Morton Deutsch, "Egalitarianism m the Laboratory and at Work," in Melvin J. Lemer and Riel Vermunt, (eds.). Social Justice In Human 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 in Experimental 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 and Receiving Help," Sociometry, vol. 34 (1971), pp. 290-301; D. Krebs, "Altruism—An Examination 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 they act to remove the injustice in order to remove the source of distress. Such models imply that self-interest moves people to avoid injustice and seek justice. Other models of distributive justice hold that people seek seek distributive justice in their exchanges with others because they are trying to balance their desire for personal gam, against the risk of provoking conflict by taking too much. Again, such models imply that justice is valued only instrinsically. There is perhaps no way to definitively disprove such models since to some extent the egoist assumptions built into them are nonfalsifiable. What is possible, and what I attempt to do in what follows, is show that there is a good deal of evidence that suggests that distributive justice is not desired only for its instrumental value. This research provides evidence that is difficult to account for within the egoist models. But, with enough manipulation, it is possible to force the data to fit into the egoist models. 32. T. Tyler & R. M. Dawes, "Fairness in Groups: Comparing the Self-interest and Social Identity Perspectives," in B. A. Mellers & J. Baron, (eds.). Psychological Perspectives on Justice (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 Allocation," 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 Future Interaction in Reward Allocations in Dyads: Equity or Equality," Journal of Personality and Social 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 Ultimatum Bargaining," Journal of Economic Behavior in Organizations, vol. 3, pp. 367-88; see also Daniel 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," American Economic Review, vol. 79, pp. 335-85. 35. J. W. Minton, J. W, Justice, Satisfaction, and Loyalty: Employee Withdrawal and Voice in 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 Social Institutions," paper presented at the annual Academy of Management meeting, Miami Beach FL (1991, August); D. Kahneman, J.L. Knetsch, and R. Thaler, "Fairness as a Constraint on Profit 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: The Perceived Legitimacy of Market Exploitation," Journal of Behavior in Decision Making.

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37. Plato, Republic, book two, Jowett translation. Again, it is worth quoting the entire passage: [Socrates:] And would you tell me, whether you think that a state, or an army, or a band of robbers and thieves, or any other gang of evil-doers could act at all if they injured one another'^ [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, having this tendency to arouse hatred, wherever existing, among slaves or among freemen, will not make them hate one another and set them at variance and render them incapable of common 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 the field of research on procedural justice 39. Robert Folger & M. A. Konovsky, "Effects of Procedural and Disuributive Justice on Reactions 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 and Distributive 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 of Procedural 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 citizen encounters with police officers see T. R. Tyler & R. Folger, "Distributional and Procedural Aspects 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 of procedural justice in student-teacher relations see T. R. Tyler & A. Caine, "The Influence of Outcomes and Procedures on Satisfaction with Formal Leaders," Journal of Personality and Social Psychology, vol. 41 (1981), pp. 643-55; for studies of procedural justice in politics see T. R. Tyler, K. Rasinski, & K. McGraw, "The Influence of Perceived Injustice on Support for Political Authodties," Journal of Applied Social Psychology, vol. 15 (1985), pp. 700-25. 42. J. Greenberg, "Organizational Performance Appraisal Procedures. What Makes Them Fair?" m R. J. Lewicki, B. H. Sheppard & M. H Bazerman, (eds). Research on Negotiation in Organizations, 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 and Konovsky, "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, (New York: Plenum. 1980), pp. 27-55. and G. S. Leventhal, J. Kamza, and W R Fry, "Beyond

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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 on Reactions to Pay Raise Decisions"; S. Alexander & M. Ruderman, "The Role of Procedural and 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 Satisfaction with 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 on the 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 of Management Executive, vol. 2 (1988), pp. 155-58; D. W. Organ, Organizjational Citizenship Behavior: the Good Soldier Syndrome (Lexington, MA.: Lexington Books, 1988) 47. C.E. Miller, P. Jackson, J. Mueller, & C. Schershing, "Some Social Psychological Effects of 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 Identity Perspectives." 48. Robert Folger and Mary A. Konovsky, "Effects of Procedural and Distributive Justice on 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 on Satisfaction with Leaders: Exploring the Meaning of Process Control," Journal of Personality and Social Psychology, vol. 48, (1985), pp. 72-81. 49. E. A. Lind, R. Kanfer, P.C. Earley, "Voice, Control, and Procedural Justice: Instrumental and Noninstmmental Concerns in Fairness Judgments," Journal of Personality and Social Psychology, (1990), vol. 59, no. 5, pp. 952-59. 50. R. E. Lane, "Procedural Goods in a Democracy: How One is Treated Versus What One Gets," Social Justice Research, (1988), vol. 2, pp. 177-192; E. A. Lind and T. R. Tyler, The Social 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 and Raise Decisions." 51. S. Strasser, J.D. Eveland, G. Cummings, O.L. Deniston, and J.H. Romani, "Conceptualizing the Goal and System Models of Organizational Effectiveness," Journal of Management Studies (July 1981); and K. Cameron, "Critical Questions in Assessing Organizational Effectiveness," Organizational Dynamics, (Fall 1980). It should be noted, however, that the concept of organizational effectiveness has had its critics See J. P. Campbell, "On the Nature of Organizational Effectiveness," m P.S. Goodman and J. M. Pennings, eds.. New Perspectives on Organizational Effectiveness (San Francisco: Jossey-Bass, 1977). 52. Companies, for example, that have a strategic commitment to just treatment of their employees and customers seem to have these qualities. An excellent example is Lincoln Electric 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.