Academic journal article Journal of Business and Entrepreneurship

Ethical Climate and Job Satisfaction in Small Businesses

Academic journal article Journal of Business and Entrepreneurship

Ethical Climate and Job Satisfaction in Small Businesses

Article excerpt


While much attention has been focused on ethics in large firms, little is known about the impact of ethical climate in the small firm. Many factors have been associated with job satisfaction, and there are important reasons why small firms should be concerned with job satisfaction. This study examines ethical climate and job satisfaction in 16 small firms, and investigates the relationship between these two variables.


The bankruptcies of Enron and WorldCom and the news of other scandals have created a heightened cynicism about corporate America, leading to a rekindling of interest in the topic of ethics, especially business ethics. This study examines how ethics, or specifically ethical climate, might influence the way employees in small businesses feel about their jobs and different aspects of their jobs.

The purpose of this study was to examine the relationship between ethical climate and job satisfaction in 16 small businesses. Some studies have examined job satisfaction in small businesses and other studies have examined ethics in small businesses. The focus of this study is the relationship between job satisfaction and ethical climate (defined later) in small business settings. Corporations, large companies, and selected professions have been the focal points for examining the relationship between job satisfaction and ethical climate. Several studies discussed later in this paper show a link between job satisfaction and ethical climate in various corporations, professions, and locations. A problem is that there is a noticeable absence of similar research in the small firm. Thus, it would be very interesting and informative to see if this relationship is evident in small firms. Given the importance of job satisfaction to organizational functioning and the importance of small business to our economy, there should be considerable interest in any variable that might impact the level of job satisfaction in these small firms.


The theoretical constructs for this study are ethical climate, job satisfaction, and small businesses.

Ethical Climate

Victor and Cullen (as cited in Peterson, 2002) defined ethical climate as the shared perceptions of what is ethically correct behavior and how ethical issues should be handled in the organization. Pulling from Kohlberg's (as cited in Victor & Cullen, 1988) research on moral atmosphere and Schneider's (as cited in Victor & Cullen, 1988) work on work climate, Victor and Cullen developed the Ethical Climate Questionnaire (ECQ). Their typology of ethical climate used ethical criteria and locus of control as the two primary dimensions. The ethical criteria dimension was based on Kohlberg's three major ethical standards: self-interest, caring, and principle. Kohlberg believed that people develop morally through three sequential stages that reflect the major ethical systems (egoism, utilitarianism, and deontology). Thus, an assumption of the ECQ is that ethical climates in organizations also reflect these ethical standards. To indicate Kohlberg's ethical standards and corresponding ethical systems, Victor and Cullen used egoism, benevolence, and principal as the three ethical criteria.

Kohlberg also proposed three different levels of ethical concern: a person's own ethical beliefs, concern for a social system and, finally, concern for something larger than the individual or the organization (e.g., humanity). These represent the sources that one uses to determine appropriate ethical behavior. Victor and Cullen (1988) labeled these levels of analysis as individual, local, and cosmopolitan. In other words, the reerent for one's definition of appropriate ethical behavior could come from his or her own personal ethical beliefs, some organization (e.g., policies & procedures), or something larger and outside the organization (e.g., legal or economic system).

The hypothesized ethical climate, therefore, became a 3x3 matrix. …

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