Organisational structure, communication and group ethics

• Authors: Paul Pezanis-Christou and Matthew Ellman.
• BSE Working Paper: 290 | September 15
• Keywords: experimental economics , group decision-making , organisational structure , communication , ethics , responsibility-alleviation and responsibility-dilution.
• JEL codes: C91, C92, D21, D63, D64, D70.
• experimental economics
• group decision-making
• organisational structure
• communication
• ethics
• responsibility-alleviation and responsibility-dilution.

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.