The Positive Ethical Organization: Enacting a Living Code of Ethics and Ethical Organizational Identity Amy Klemm Verbos Joseph A. Gerard Paul R. Forshey Charles S. Harding Janice S. Miller ABSTRACT. A vision of a living code of ethics is proposed to counter the emphasis on negative phenom- ena in the study of organizational ethics. The living code results from the harmonious interaction of authentic leadership, five key organizational processes (attraction– selection–attrition, socialization, reward systems, deci- sion-making and organizational learning), and an ethical organizational culture (characterized by heightened levels of ethical awareness and a positive climate regarding ethics). The living code is the cognitive, affective, and behavioral manifestation of an ethical organizational identity. We draw on business ethics literature, positive organizational scholarship, and management literature to outline the elements of positive ethical organizations as those exemplary organizations consistently practicing the highest levels of organizational ethics. In a positive ethical organization, the right thing to do is the only thing to do. KEY WORDS: authentic leadership, ethical organiza- tion, positive organizational scholarship, organizational culture, organizational identity ABBREVIATIONS: POS: Positive organizational scholarship; P-O fit: Person–organization fit Introduction What distinguishes an ethical organization? Leading business ethics scholars tend to focus on lapses in ethical behavior, extreme examples of corporate Amy Klemm Verbos is a Ph.D. candidate at the Sheldon B. Lubar School of Business, University of Wisconsin-Mil- waukee, where she received a ChancellorÕs Fellowship, Graduate Fellowship, Dissertation Fellowship, and C. Ed- ward Weber Research Award. She co-authored ‘Positive Relationships in Action: Relational Mentoring and Mentor- ing Schemas in the WorkplaceÕ in the forthcoming edited book, Positive Relationships at Work. Her work on po- sitive organizing also has been presented at the Academy of Management Conference. Joseph A. Gerard is a Ph.D. student at the Sheldon B. Lubar School of Business at the University of Wisconsin-Milwau- kee. He is a lecturer at the University of Wisconsin-White- water teaching organizational behavior, strategy, and accounting. He is a founding member of Ascent Organization Development LLC, which provides management consulting services to for-profit organizations in the areas of effectiveness and performance enhancement. Paul R. Forshey is a Ph.D. student in Organizations and Strategic Management at the Sheldon B. Lubar School of Business, University of Wisconsin-Milwaukee. His research interests include startup firms and firms in transition. Charles S. Harding is a Ph.D. student in Organizations and Strategic Management at the Sheldon B. Lubar School of Business at the University of Wisconsin-Milwaukee. Awar- ded a ChancellorÕs Fellowship, his research interests include strategic decision-making and the role of value creation in strategy. Janice S. Miller is an Associate Professor at the Sheldon B. Lubar School of Business at the University of Wisconsin-Milwaukee where she has received the Business Advisory Council Award for Teaching Excellence. Her published work has appeared in Academy of Management Journal, Journal of Organi- zational Behavior, and Journal of Business Ethics among others. She received her Ph.D. in Human Resources Man- agement from Arizona State University. Journal of Business Ethics (2007) 76:17–33 Ó Springer 2007 DOI 10.1007/s10551-006-9275-2