The Role of Ethical Culture and Relationships
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Defining corporate culture.
The role of corporate culture in ethical
decision making.
Leaders influence corporate culture
Motivating ethical behavior
Organizational structure and business ethics
Group dimensions of corporate structure and
culture
Variation in employee conduct
Can people control their own actions within a
corporate culture?
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Corporate culture is viewed as the shared
beliefs that determine how people behave
and solve business problems or how they go
about doing business and performing their
daily jobs.
Corporate culture is related to norms, values,
belief, rituals, code of ethics, artifices, and
the identity and personality of the
organization.
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Read about Southwest Airlines culture of funloving that dates back to the days of its
founder Herb Kelleher. Stories and
ceremonies shape the corporate culture how?.
 A company's history and unwritten rules are a
part of its culture.
 C.c is measured in the following ways:
1. Mgt and the board of directors should
demonstrate their commitment to strong
controls through their communications and
actions.
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2. Every employee is encouraged and supported to
have active involvement in the internal control
system.
3. Every employee is empowered to report policy
exceptions.
4. Employees are expected to be in the
communication loop through resolutions and
corrective actions.
5. Employees have the ability to report policy
exceptions anonymously to any member of the
org, including the CEO, other managers, and
the board of directors.
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Three common elements in defining
corporate culture:
1. Culture is shared among org members.
2. Culture is formed over a long period of
time.
3. Culture is relatively stable.
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Strong vs weak cultures
Formal vs informal cultures.
Check figure 7-1
Leaders at the top have a determining factor
in creating a high integrity culture, therefore
creating an ethical culture.
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Ethical frameworks and evaluations of C.C. check
figure 7-2.
Culture audit is an assessment of the org’s values.
Very good to use table 7-2.
 Ethics as a component of C.C
If ethics is a major component of corporate
culture, employees will be rewarded for
observing ethical behavior. HR will hire people
based on ethical standards and measures,
marketing and sales will do accordingly, finance
will do so and so on and so forth.
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Managing culture is very important. When
managed effectively, culture will be the source of
success. Culture will be the secret behind that
success.
 Managing culture means what?
planning and directing the organization to have
the right culture, healthy culture and effective
culture.
An ethical culture that does not compromise its
ethical values under whatever circumstances
(under pressure from shareholders, wall street,
short term results, or even under the pressure of
not making profit).
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Managing culture includes creating an ethical
culture by determination, planning,
organizing and leading that culture.
Rewarding people and disciplining people
according to their compliance to the right
ethical standards applied by the org.
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Use of legal departments to determine ethics,
auditing departments, monitoring systems.
The problem with this is that its short-term
approach rather than a long term one.
Value based ethics culture is based on clear
mission statement that defines the firm as well as
how customers and employees should be treated.
The focus here is on values not rules. The first is
consistent with single loop learning whereas the
second is consistent with double loop learning
(explaining why not just what).
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Differential Association refers to the idea that
people learn ethical or unethical behavior
while interacting with others who are part of
their role-sets or belong to other intimate
personal groups.
Also, superiors have a strong influence on the
ethics of their subordinates.
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Exposing an employer’s wrongdoing to
outsiders.
 Two forms of whistle blowing
1. Internal- means inside the org.
2. External- to outside the org.
Via hotlines
Protect whistle blower against retaliation.
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In this section we have explained 5 sources or
bases of power for leaders though which they
may influence followers:
1. Reward power
2. Coercive power
3. Legitimate power
4. Expert power
5. Referent power
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We called the above first three as positional basis
of power because they come from the position
the leader holds, and the next two are called the
personal basis for power including referent and
expert sources. Now the positional one will lead
to compliance and the personal will lead to
commitment and there are very substantial
differences between both. The compliance will
lead to quantity and efficiency in outcomes and
the commitment will lead to quality performance
and effectiveness in outcomes.
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What is motivation?
 What is job performance?
 Do you know about Maslow’s hierarchy?
 Some people may overbill time worked on
projects to satisfy their family basic needs.
Once people continue up the ladder, they
might become tempted by obeying company
rules and policies, and concerned with
internal recognition and achievement than
their family needs.
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What is meant by frustration-Regression
theory in Maslow’s need hierarchy?
Individual’s personal ethics and needs will
significantly affect his or her ethical
decisions.
What is higher order needs and lower order
needs in Maslow’s hierarchy?
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monday 
The case 
Case 10 
BP 
Page 220 
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Table 7-5 is a good illustration of the cons and pros
of centralization vs decentralization
 Centralization affects ethical issues:
1.
Behaving according to the “letter of the law” rather
than the spirit. Strict rules and regulations.
2.
Little upward communication make top managers
unaware of unethical behaviors down the hierarchy.
Including sweatshop labor and forced labor.
Enslaved in sweatshops and migrant labor working
on farms and building homes.
3.
Blame shifting or scapegoating.
4.
System thinking problem.
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What is decentralized org?
Empowered lower level managers and
employees might misuse authority and get
engaged in unethical problems and
sometimes disasters like the Bhopal disaster
in India. Dumping waste outside their
immediate community. Shell company
scandal of dumping toxic waste under the sea
in the 90s. This was due to misuse of power
and authority.
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Select 3 to 5 key words through which you may
empower your employees without misusing
empowerment.
Through which you will be sure 100% that they
will not be unethical or misuse authority. .1
1- trust
A- character
B- knowledge and skill
2- rewards
3- information sharing
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Which one more ethical centralization or
decentralization?
There are cases where centralization creates
the grounds for unethical behavior and there
are cases where decentralization is. Rules are
necessary for central org and culture is
necessary for decentralization. Why?
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Types of groups:
1.
Formal groups
2.
Informal groups
Formal groups
1.
Committees; what is groupthink?
ethical committees are good for recent ethical crisis in
the business. They need to be independent and
avoid politics. Also the committee needs to have
guidelines and policies and rules to avoid personal
conflict. Texas instrument is a good example.
2- work groups
3- taskforce
Etc.
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Informal groups help develop informal
channels of communication.
 Informal communication like rumors may be
much faster than formal communication
which might act as an early warning signals
against any unethical situation.
Before asking the formal system, you might
informally ask your friend of what is right and
what is wrong around here.
 Gossiping
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Group norms are standards of behavior that
groups expect of their members. Like the
group norms of leaving early from work or
taking a long lunch break. Violating the
standard (for example, no more than 30
minutes break) members will receive a form
of punishment from the group. Such system
is good to punish members violating ethical
standards.
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Norms might enforce ethical behavior and
might on the other hand enforce unethical
behaviors like using the company’s
resources for personal needs. Telephone,
copy machine, company parts or material.
Cars, equipment, software and many others.
Some companies provide employees with cars
for job use and they use it for their family and
friends.
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Look at table 7-7 its very interesting- check
where people you know fit in such framework.
 What is the role of managers against such
percentages.
 Its good to see also table 7-8.
 Can people control their own actions without a
corporate culture?
The answer is hard and few people rely on their
own and control their behavior away from the
corporate culture.
End of chapter seven.
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Any questions
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