Ethos

Ethos is a Greek term commonly translated as “moral character.” It was initially discussed in the context of an individual’s moral character but has also been used in a more modern context to describe a group’s or even a corporation’s collective moral character. Ethos is established through habits, viewed through a pattern of behavior, as opposed to any single act. This pattern becomes a component of reputation, including corporate reputation. According to Aristotle in his seminal text On Rhetoric, ethos is also one of three artistic proofs critical to persuasion. This entry reviews the components of ethos according to Aristotle and the concept of corporate ethos. The entry then discusses the role that ethos plays in corporate reputation. Last, the entry reviews the corollary ways in which ethos can have an impact on a corporation’s persuasiveness relating to advertising and reputation management.

Components

According to Aristotle, ethos is heavily influenced by three primary components (Figure 1): (1) aretē (“virtue”), (2) phronēsis (“practical wisdom”), and (3) eunoia (“goodwill”).

Figure 1 Ethos as Presented in Aristotle’s On Rhetoric

Source: Shanahan, M. F., & Seele, P. (2015). Shorting ethos: Exploring the relationship between Aristotle’s ethos and reputation management. Corporate Reputation Review 18(1), p. 39.

Aretē refers to a person’s capacity to make a virtuous or sound moral judgment. According to Aristotle in Nicomachean Ethics, a virtuous person makes correct moral judgments by evaluating what is morally relevant in a given context and applying practical wisdom in pursuit of a virtuous act or decision. A virtuous act is one that finds the mean between two vices: excess and deficiency. For example, in the area of confidence, cowardice is deficient and recklessness is excessive, while courage is the mean, or the virtue. Likewise in the area of honesty, self-deprecation is deficient and boastfulness is excessive, while truthfulness is the mean, or the virtue. A virtuous person acquires this framework through training and cultivation.

The second component of ethos is phronēsis, or “practical wisdom.” The third component is eunoia, a person’s goodwill compassion for others. Collectively, virtue, practical knowledge, and goodwill form an ethos. While the concept of ethos was initially developed in the context of an individual, and the search for eudemonia, the term is now commonly used in reference to groups, societies, and even corporations, in view of their collective moral character.

These traits, demonstrated through habitual behavior, form an ethos that is located in an individual, or group, but it is a social construct in that it is connected to what is culturally relevant at a given point in time within a community.

Corporate Ethos

Corporations develop and display ethos through their decisions, acts, and stable traits as displayed over time. Cultivation of a corporate ethos can be honed, similar to the individual craftsmanship proposed by Aristotle, but the decisions are formed by those responsible for organizational strategy and decision making, as opposed to any one individual. These collective decisions are more decentralized and difficult to control and cultivate than in an individual. Similar to the ethos of an individual, though, corporate ethos is not a result of accidental or individual acts and can be tested when a corporation is faced with a highly visible ethical dilemma.

As is the case with individual ethos, corporate ethos is enhanced by the presence and demonstration of practical wisdom or expertise (phronēsis) and goodwill (eunoia). Corporations often demonstrate phronēsis through their industrial knowledge, specialization, and success, and eunoia through altruism, such as corporate social responsibility.

Brand, Reputation, and Reputation Risk

In the corporate context, ethos, or moral character, is becoming an increasingly important pursuit in view of its connection to corporate reputation. Good reputations allow higher pricing and increased sales, and customers are more likely to purchase a broader spectrum of products from a trusted company. A company with a good reputation attracts employees with higher qualifications and investment, allowing for more sustainable growth and lower cost of capital. Most corporations therefore strive to develop a good reputation, which is considered to be a highly valuable and strategic asset. In fact, it is estimated that up to 70% of a company’s market value can be attributed to intangible assets such as goodwill, brand, reputation, and intellectual capital. If there is a difference between a reputation and the actual ethos, or character, of a company, then the company may be exposed to reputational risk. Reputational risk, and its management thereof, has become an increasingly common topic, particularly after the 2008 recession.

Persuasion

In rhetoric, ethos also plays an important role as one of the persuasive appeals. According to Aristotle, a speaker’s persuasiveness depends on the audience’s perception of ethos, along with the effective use of pathos (“emotion”) and logos (“logic”). Of these three components, Aristotle perceived ethos to be the most important. Following Aristotle’s rhetorical theory, corporations with a more robust ethos that properly employ logic (logos) and emotion (pathos) in their messaging will be more persuasive. Corporations use a mixture of dialogue, persuasion, coordinated messages, and corporate silence to influence stakeholders; however, persuasion is likely the most important component. Figure 2 summarizes the role of ethos in corporate reputation management.

Figure 2 The Role of Ethos in Corporate Reputation Management Strategies

Source: Shanahan, M. F., & Seele, P. (2015). Shorting ethos: Exploring the relationship between Aristotle’s ethos and reputation management. Corporate Reputation Review 18(1), p. 45.

In sum, corporations rely on persuasion, and hence their ethos, for many purposes, including advertising, convincing shareholders, seeking capital, and managing reputation, as well as managing reputation risk. Corporate ethos, or moral character, plays a large role not only with regard to reputation, commonly among a corporation’s most important assets, but also with regard to a company’s ability to repair its reputation in view of the role of ethos in persuasion.