In this paper, the authors explore the joint determination of economic output, wages, corporate culture, employees’ ethical standards and monitoring intensity in an analysis of organisational dysfunction.
The utility from economic activities can frequently be enhanced through unethical, socially harmful activity, such as corruption, sexual harassment and environmental degradation. The ethical sensitivities of managers and their employees are shaped through their social interactions and thus organisational dysfunctions can arise. Such dysfunctions may be mitigated through changes in government policies or social norms.
These changes become particularly effective if they encourage the managers and employees to adopt more ethical narratives. This narrative shift gives the managers and employees more ethical objectives, guiding their economic behaviours. The more ethical objectives induce them to adopt even more ethical narratives, and so on, in a virtuous circle that promotes social welfare.
About the authors
Dennis Snower, Blavatnik School of Government, University of Oxford
Steven Bosworth, University of Reading