Organizations and Ethics: The Adoption and Implementation of the Ethics and Compliance Officer

As open systems, organizations interact with their environments and respond to laws, norms, and other pressures to conform in search of societal legitimacy. Organizations, however, are far from uniform in their responses to institutional pressures. As entities with idiosyncratic sets of values and histories, organizations act according to a mix of established patterns of behavior and perceived self-interest. This is particularly true of issues such as ethics, where ambiguous and evolving definitions of expected behavior create complex pressures that encourage responses of varying degrees of substance. This program of study examines how firms respond to these shifting pressures for greater ethical behavior by appointing an Ethics and Compliance Officer (ECO), from 1990 to 2008. The first paper identifies separate antecedents to the adoption and implementation of the ECO at different levels of analysis. Results demonstrate that, while firms make adoption decisions in response to broad, field-level forces, it is narrower, firm-specific forces that determine resource commitments in implementation. As such, this study construes institutional forces as multi-level phenomena that act on firms both temporally and spatially to help explain different kinds of behavior. The second paper looks at the consequences of implementation of the ECO as a means of investigating values and institutions in the context of business ethics. In particular, I test a theory of stakeholder attention to organizational resource commitments. Results support the hypothesized curvilinear relationship between resource commitments and stakeholder attention—while both high and low levels of ECO implementation generate low levels of reported ethics transgressions (the former due to good firm behavior and the latter due to stakeholder disengagement), moderate ECO implementation produces elevated transgression reports (due to raised expectations and increased engagement). Contrary to extant theory, results are consistent across both internal and external firm stakeholder groups. In combination, these studies identify important antecedents and consequences of adoption and implementation behavior that help explain organizational heterogeneity in the face of institutional pressures to conform.