When I was in high school, I wrote for a school literary magazine. In those days, a town printing shop set the type for these magazines. One day an entrepreneurial question flashed through my brain: What kinds of print products did I and my friends most need? The answer that occurred to me, unfortunately, was phony ID cards to be used for the sole purpose of purchasing liquor illegally.

So the business plan was as follows: I got the local printers to reproduce small cards that read “State of Wyoming Operator’s License” at a cost of $25 for 500 cards. I then sold the cards at school for $1, netting a profit of $475.

One of my friends was caught using his fake ID at a liquor store in his hometown. He reported where he purchased it, and I ended up on social probation for the rest of the year. As part of my punishment, I received stern lectures from two police officers—one told me that if he had his way I would be sent to prison as a juvenile delinquent and the other patiently explained to me that I could have brought about terrible harm, such as causing a deadly drunk-driving accident.

Looking back, there is no doubt in my mind that I learned a lasting lesson from my misdeed and its unpleasant consequences. My mistake was that my venture was corrupt from the start, accomplishing nothing more than exploiting a market demand that itself was illegitimate.

Much has been made in recent years of corporate fraud, corruption in the executive suite, and other abuses of trust by those in managerial roles. Although the process of uncovering scandals is always a healthy act, necessary for cleansing the system and discouraging further abuses, there is often a cartoonlike quality to the discussion. Politicians and the media, in particular, have ways of reducing such revelations to oversimplified stories of good versus evil. In such accounts, the corporate world is made up of good guys and villains.

The damage is done by the villains, so the cure must be to expel the villains and let the good guys take over. But such simplistic accounts diminish people’s understanding of what goes wrong and hamper the efforts to avoid similar problems in the future.

In truth, there is no great wall between the saints and sinners of the business world. All persons in business are subject to constant temptations to cut corners, bend the rules, and further their own self-interests at the expense of their clients and companies. Some people resist these temptations, while others give in either occasionally or regularly. Few people actively pursue every scam they think they can get away with. The differences in response do matter, but they are distinct shades of gray, rather than separate colors of the rainbow.

Throughout their careers, corporate heroes and corporate villains face similar choices and are lured by the same rewards of riches and power. Most of them make similar moral mistakes early in their careers. But at some point their stories part. Leaders who go on to serve themselves and their businesses learn from their mistakes and find ways to avoid illegitimate temptations. Leaders who end up as targets of investigative reporters and congressional hearings have failed to recognize the direction in which their self-serving behavior is taking them. Small acts of corruption grow into bolder ones, a corner cut here metamorphoses into a law blatantly ignored there, and almost without awareness, ambition turns into criminality.

To try to understand what motivates the highly successful and whether they consider morality in their business lives, I conducted interviews with 48 successful businesspeople and 23 people dedicated to lives of public service. From these interviews, I identified four types of business morality and found that successful leaders and managers have much in common.

From the interviews, four dimensions of business morality—the generative, empathic, restrictive, and philanthropic modes—emerged. During the interviews, I found frequent mention of all four dimensions of business morality. The respondents differed in which of these aspects they personally emphasized, but there was virtually no disagreement about their importance.

Generative. Generative morality arises from deep inner purposes and beliefs. Not everyone feels such purposes and beliefs, or sees how to connect them to their career choices. But those who do often find these core beliefs to be a valuable source of inspiration in their work.

Deep purposes and beliefs provide the sparks of imagination that can give birth to a new business concept. They also can provide a sense of commitment that can sustain the concept during inevitable periods of doubt, stress, and temporary reversals.

This dimension is stated first because it is the mode of morality that people tend to be most in tune with when they first choose a career and set their goals. People who enter business to make positive contributions to the world are motivated by purposes and beliefs that can form the basis of a highly generative morality.

Approximately two-thirds of the business leaders interviewed reported the use of generative morality, in the sense of drawing on beliefs and purposes for inspiration. Many talked about how they used their moral imaginations to produce innovative business concepts and to muster the persistence and commitment needed for sticking with a new idea despite skepticism and the risk of the unknown. Some said they actively trained their minds to nurture this kind of moral creativity.

An example of one such business leader is Sir John Templeton. When Templeton was active in business, he was an investment manager who gained international re­nown and a vast fortune. He was the first investment manager to create a global family of mutual funds. As early as the 1930s, Templeton found economic value in places where few Western investors had thought to look: the Middle East, Australia, even remote parts of Africa. The Templeton funds grew from a one-room operation over a local police station into a multibillion-dollar corporation.

The way that Templeton came up with this concept reveals how business leaders use generative morality as a source of innovative business concepts. What gave him the vision to explore global investing and the fortitude to gamble in such little-known territories lies in Templeton’s commitment to his particular faith. He devoutly believes in the love of all humanity, without discrimination of any sort.

Templeton never used his companies to proselytize for his particular faith. He did not expect his employees or his customers to join a church. What he did do, however, was express his vision by founding a truly international, boundary-crossing approach to investing, an approach that seemed risky and audacious at the time but that ultimately proved brilliantly successful.

Empathic. Empathic morality is an approach to business relationships that reflects the golden rule principle of treating others as you yourself would like to be treated. It fosters trust, collaboration, understanding, and communication.

Among the business leaders interviewed, the author found that many look to the age-old principle of the golden rule as their way to ensure that their behavior conforms to such standards as decency and honesty. At the heart of the golden rule is empathy.

In the author’s study, almost all of the participants expressed an active commitment to building trusting relationships through empathic understanding. Without prompting, more than one-fourth invoked the golden rule by name to explain how they manage relations with partners, clients, and employees.

What applies within companies also applies among companies. In addition to fostering trusting communication within their own companies, business leaders today say that they must establish good collaborative relations across organizations, even in cases where those organizations have a fundamentally competitive relationship with one another.

Some interviewees in the high-tech corridors of Silicon Valley and Boston, for example, called this “co-opetition.” Whatever this trend is called, most try to practice it, because they believe that in today’s ever-shifting business world, this kind of cross-company teamwork provides a decisive advantage, an advantage that hinges on a leader’s reputation for decent conduct and trustworthiness.

Restrictive. Restrictive morality is the widely shared societal code of ethics that protects people from trouble, regulates their behavior according to the traditional norms that society demands, guards their reputa­tion, and provides them with safety from legal attack. It is the mode of morality most strongly emphasized by business-school ethics courses and corporate ethics training.

More than four-fifths of the business leaders in the study placed an extremely high priority on restrictive morality. Their commitment revolved around such values as resistance to corruption and refusal to cut corners in truthfulness, fairness, and respect for the law. These values guided their relations with partners, employees, customers, competitors, and society at large. The interviewees reported that these values had enabled them to reject frequent pressures to give or take bribes, to put out deceitful public information, to renege on contracts, to manipulate share prices, to cover up defective products, to steal other people’s inventions, to cheat vendors or customers by unfair pricing, or to harm their communities through irresponsible environmental policies.

This ethical sense also helped these business leaders establish dependable relations with colleagues and competitors. They saw this as an urgent challenge in the current fluid marketplace.

Because of globalization, technological innovation, and conglomeration, com­panies rise and disappear quickly. Jobs are created and lost overnight, and workers move on the instant they spot a new oppor­tunity. To help maintain quality employees and good working relationships, the business leaders in the study used ethical principles to create a spirit of cooperation in their intensely competitive environments.

Philanthropic. Philanthropic morality reflects a charitable impulse. This is what motivates companies to donate funds to charities. It requires the same sense of purpose, diligence, and humility that brought the profits in the first place. When done properly, philanthropic morality reaps benefits beyond pure altruism, such as enhancing the reputation of the business leader and the company in the communities in which they operate. When done poorly, however, philanthropy causes more harm than good, damaging both the community and the donor’s reputation.

Philanthropic morality is a widely followed path of public service in the business world, as four-fifths of the business leaders in the study subscribed to such a practice. Philanthropy enables business leaders to define relations with the broader community in ways that yield benefits for both the community and the company, especially providing the company with compelling and legitimate public relations material. In certain cases, philanthropy can feed back to a business’s founding mission, thus serving the generative function as well as the community-relations one. For example, a computer company that donates equipment to schools not only aids the worthy cause of education, but also expands its future market by enlarging its consumer base and building brand recognition within it.

Andrew Carnegie once said that it is harder to give money away well than to make it. The caution is well-founded. Although philanthropy rightly occupies an honored place among the four dimensions of business morality, it is not as certain a means to doing good as it may first appear. Believe it or not, simply giving away money does not always improve the lot of those who receive it, as many philanthropists discover.

The same moral qualities that lead to business success—purpose, insight, empathy, humility, honesty, trustworthiness—are also required for effective philanthropy. Moreover, philanthropy should never be seen as a salvation for a corrupt and ruthless business career.

The interviewees also offered a warning about the pursuit of morality in business. Being consistently moral is a matter of virtue, and humility is one of the primary virtues, in business as well as in life. People who claim moral superiority are arrogant rather than humble, and their sense of their own importance can lead their judgments and their choices astray. Hubris also prevents its host from learning from his or her mistakes.

Morality is always a work in progress. People who remain aware of their own imperfections and are determined to improve throughout their careers are the ones most likely to do the right thing for themselves and their companies.

William Damon is professor of education at Stanford University at the Hoover Institution on War, Revolution, and Peace. The article is an excerpt from his book The Moral Advantage published by Berrett-Koehler Publishers, Inc. The book can be purchased by calling 800/929-2929 or by visiting the company’s Web site atwww.bkconnection.com.