An examination of the relationship between ethical behavior, espoused ethical values and financial performance in the U.S. defense industry: 1988?1992

Evaluating espoused values: Does articulating values pay off?

“…In essence, articulated values can indeed reflect both organizational practices and strategies (Daly et al, 2004) and further, as expressed by Kabanoff and Daly (2000, p. 286): "Organizations enhance their legitimacy by espousing values that are in fact congruent with their cultural milieu". A few contemporary studies have followed this route and used official values as independent variables for comparisons and performance (e.g., Daly et al, 2004;Kabanoff & Daly, 2000;Mayer-Sommer & Roshwalb, 1996). Specifically, scholars such as Kabanoff et al (1995) and Daly (2000, 2002), have been able to assign statistically significant clusters of organizational types based on their espoused value structures.…”

“…ROA is considered by financial analysts to be the most stringent and excessive test of return to shareholders and have been used repeatedly for comparing performance across firms (e.g., Beurden & Gössling, 2008;Damodaran, 2007;Mayer-Sommer & Roshwalb, 1996). We collected ROA data for the years 2005, 2006 and 2007 from Thomson Analytics.…”

Action and Ethics Education

“…McKendall et al (2002) find a positive relation between ethics programs (code, talk, education, processes) and unethical action (OSHA violations). Mayer-Sommer and Roshwalb (1996) find a positive relation between ethics programs (membership in the Defense Industry Initiative of Business Ethics and Conduct) and unethical action (Defense related fines and settlements).…”

The U.S. Military-Industrial Complex is Circumstantially Unethical

“…So the American public was shocked to learn in the mid-1980s that the MIC had practically institutionalized overpricing. There ensued many fines, civil recoveries, settlement agreements, reimbursements, and restitution payments amounting to over $2,000,000,000 (Mayer-Sommer andRoshwalb, 1996, p. 1260). Few defense contractors or contracting officers were convicted of fraud (Lansing and Burkard, 1991;New York Times 12 Nov. 1990, p. A1;Pasztor, 1995, p. 11).…”

“…It found not fraud but inefficiency and recommended defense procurement codes of ethics (Packard, 1986). Many companies subsequently adopted such a code voluntarily as the Defense Industry Initiative (Kurland, 1993); but a company's participation in this endeavor ameliorated its public image rather than its employees' ethical behavior or the size of its contributions to influential politicians (Mayer-Sommer and Roshwalb, 1996). The government did impose some tighter regulatory standards: notably, the Federal Sentencing Guidelines for Organizations (1991) and the SarbanesOxley Act (2002).…”