We study a firm with ethical employees who can adopt a profitable working practice that may harm their customers. Their response to this dilemma reflects their compensation contract as well as their ethical willpower. We identify optimal compensation contracts under utilitiarian and...

Ethical work climate (EWC), introduced by Bart Victor and John Cullen, plays a central role in the business ethics literature due to its influence on employee’s ethical decision-making. Yet, the often-used framework is limited as a descriptive and prescriptive model because it lacks a...