2004 • Volume 29 • Number 1

Observations on the Need to Redesign Organizations and to Refocus Corporation Law to Promote Ethical Behavior and Discourage Illegal Conduct

William ArthurWines and J. Brooke Hamilton III 

The social psychology researches of Milgram, Zimbardo, and others, show that good people can do bad things when placed in organizational structures and pressured by a strong corporate culture to be a “good team member.” Much of corporate law and applied ethics, to the contrary, focuses on the intentions and character of individual decision-makers as if they operated in a vacuum. While assigning responsibility to individuals is essential in law and ethics, this article argues for a broader, multidisciplinary approach to understanding why legal and ethical meltdowns occur in businesses. To avoid such meltdowns, businesses must appreciate the changing nature ofsocietal mandates and demonstrate more respectfor the institution of law. Next, building on the work of James Waters, organizational blocks which operate to prevent healthy ethical behavior even when both managers and employees of a business want to do the right thing, are examined. Finally, building on the work of Robert Jackall, this article reviews some of the “rules for successful careers” that work to exclude consideration of law and ethics in managers’decision making, and make some tentative suggestions for legal and organizational reforms.