Organizational Structure, Communication, and Group Ethics

• Authors: Matthew Ellman.
• American Economic Review

This paper investigates experimentally how organisational decision processes affect the moral motivations of actors inside a firm that must forego profits to reduce harming a third party. In a “vertical” treatment, one insider unilaterally sets the harm-reduction strategy, the other can only accept or quit. In a “horizontal” treatment, the insiders decide by consensus. Our 2-by-2 design also controls for communication effects. In our data, communication makes vertical firms more ethical, voice appears to mitigate “responsibility alleviation” in that subordinates with voice feel responsible for what their firms do. Vertical firms are then more ethical than the horizontal firms for which our bargaining data reveal a dynamic form of responsibility-alleviation and our chat data indicate a strong “insider-outsider” effect.