This study focuses on the cultural context of ethical decision making by considering the relationship between power distance and ethical judgment. Specifically, we propose that this relationship exists because of the influence of peers on ethical judgment and perceptions of justice. Considering the importance of peers in stage three of Kohlberg's model of moral development, we argue that peers are the basis for social comparisons, social cues and social identification and, hence, are critical to an individual's beliefs about justice. Using scenarios developed by Reidenbach and Robin, data were collected from German and Italian graduate business students. Germany and Italy differ substantially in power distance, but not in the three other cultural dimensions of Hofstede. Results show that the ethical assessment of the respondents from the two countries differs when justice criteria are used. Theoretical and practical implications of the results are discussed.