Punishing Vices or Rewarding Virtues? The Motivations for and Benefits of Ethical Ratings for Private Italian Companies

Abstract

In A Treatise on Virtues and Rewards, Dragonetti (1769) advances a theory of action based on rewards for virtues. The idea of rewards, especially of awards, relies on the hypothesis that intrinsic motivations drive the actions of good or virtuous citizens. We apply this theory to virtuous entrepreneurs who voluntarily adopt ethical principles as promoted by a recent Italian law. These firms receive an ethical rating (ER) by the Italian Competition Authority (ICA) and can access a set of economic and non-economic benefits (i.e. rewards). We survey a sample of 152 private companies with an ER and examine their views on the economic and social motivations and benefits as well as the perceived usefulness of the ER for improving ethical behaviour. An exploratory factor analysis detects four categories of motivation (economic, competitive, social, and responsiveness) and two categories of benefits (economic and competitive), which we use in regression models to test Dragonetti’s theory. Overall, respondents see the ER as an effective tool, except in terms of improving economic performance. We also find that entrepreneurs with lower economic and higher responsiveness motivations attain higher ERs. However, in the respondents’ opinions, the ER is (still) not producing any concrete benefits since we find no relationship between the ER and economic or competitive rewards. These findings have implications for the ICA as well as for private companies.