Creating an Ethical Organization Climate
Group 5:
Beverly Peete, Bobby Lane, Ryan Barker,
Dennis Daniels, Crystal Thomas, and
La’Shawn Harbin
Introduction
“Corruption is a durable and adaptable virus”Professor Yadong Luo
This presentation will cover different aspects on how to
create an ethical organization climate. The topics are
listed below:
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Leaders as Ethics Officer
Ethical Climates
Signs of Healthy Ethical Climates
Climate Building Tools
Case Study 1
Case Study 2
The Leader as Ethics Officer
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Leaders act by exercising influence through the process of social learning and
building positive ethical climates
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Leaders of their organization may cast light or shadow in large parts by the
example they set
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Moral leaders make sure that ethics messages are not drowned out by other
messages about tasks and profits
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Ethical leaders make ethical considerations a top organizational priority
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They create positive ethical climates that promote moral behavior leaders and
followers alike
Ethical Climates
Ethical climate is best understood as part of an
organizations culture. There are five primary
types.
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Instrumental- principles of ethical egotism
Caring- concern or care for others
Law and Order- external criteria professional codes of conduct
Rules- governed by policies, rules, procedures
Independence- members can make their own decisions
Signs of Healthy Ethical Climates
Key Markers:
• Humility
• Zero Tolerance for
Destructive Behaviors
• Justice
• Integrity
• Trust
Beverly Peete
PSC 785 – Group 5
Humility
High performance businesses are always in danger of accepting
unethical behavior as the normal way of operating.
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Culture of Competition
High-performance Organizations
Exaggerated focus on mission
Stories that justify poor behavior
Culture becomes isolated
Humility Continued
Collective Virtue
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Aware of strengths and limitations
Open to new ideas and knowledge
Acknowledge the importance of serving a higher power
Prevent hubris and the disdainful treatment of outsiders
Sensitive to the signs of ethical trouble
Zero Tolerance for Individual and Collective
Destructive Behaviors
Common Categories
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Incivility: disregard others and violate norms for respect
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Aggression: consciously trying to hurt others or the organization
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Sexual Harassment: aggression directed largely at women –
Quid Pro Quo
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Discrimination: putting members of selected groups at a
disadvantage
Zero Tolerance for Individual and Collective
Destructive Behaviors – Cont’d
How to Reduce Destructive Behaviors
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Create zero-tolerance policies that prohibit antisocial actions
Obey guidelines
Constantly monitor for possible violations
Move quickly when standards are violated
Address the underlying factors that trigger destructive
actions
Justice
Distributive – Procedural – Interactional
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Deal truthfully with organizational members
Offer clear explanations
Distribute pay and other benefits according to a
well-structured system
Involve followers in decision-making processes
Integrity
Ethical soundness, wholeness, and consistency
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Sensible, clearly communicated values and
commitments
Commit to and act on the values
Values are part of the routine decision-making process
Systems and structures support and reinforce
organizational commitments
Knowledge and skills needed to make ethical decisions.
Trust
Good-faith – Honest – Fair
Trust binds group members together, fostering collaboration and
communication; lowering costs; reducing turnover; encouraging
organizational learning, innovation, and work effort; and generating
employee satisfaction and commitment.
Structural Reinforcement
An organization’s structure shouldn’t weaken the ethical standards of its associates. It
should encourage a higher moral performance of both leaders and followers
The 3 features of an organization’s structure that have the strongest impact on moral
behavior
1. Monetary and nonmonetary reward systems.
2. Performance and evaluation processes.
3. Decision-making rights and responsibilities.
Monetary and nonmonetary reward systems.
Example of this would be giving employees incentives. For instance
when a person takes there car to get an oil change and let’s say the deal is
$20 oil changes. The managers tell the employees if they can sale more
products to the customer they will get a bonus. In turn the mechanic will
change the oil and then tell the customer they need additional services while
making them feel stressed and threaten. This will increase sales because the
customer is in fear of their car breaking down. This is unethical because they
customer may not necessarily need those services and they are not as severe
as they have been lead to think.
Performance and evaluation processes
Performance and evaluation processes should reflect the balance
between means and ends. However these can also be somewhat subjective
because it leave employee reviews open to potential unethical evaluations.
Managers could intentionally or unintentionally evaluate staff using different
criteria, which can raise or devalue individual scores in an unethical manner.
Managers may also fail to take their personal feelings into account when issuing
performance judgment, which can bias their assessment, take the focus away
from the professional elements of an evaluation, and skew the results.
Decision-making rights and responsibilities.
Ethical conduct is more likely when workers are responsible for
ethical decisions and have the authority to choose how to respond
(Johnson). Ethical dilemmas are characterized by the ‘what if’ question
and are often situations where there seems to be no clear solution to the
problem. Moral or ethical leadership involves the commitment to doing
what is right according to societal and cultural beliefs and values about
acceptable behavior. Ethical leaders distinguish themselves by making
decisions in the service of long-term benefits that may be inconvenient,
unpopular, and even unprofitable in the short-term. Moral leaders have a
clear understanding of their own values and hold themselves accountable
for them. Leaders who are ethical demonstrate a level of integrity that
emphasizes their trustworthiness, and this trust enables followers to
accept the leader's vision
Social Responsibility
Concern for those outside the organization is another sign of a healthy ethical climate
(Johnson).
Corporate social responsibility (CSR) can be defined as the "economic, legal,
ethical, and discretionary expectations that society has of organizations at a
given point in time" (Carroll and Buchholtz 2003, p. 36). The concept of
corporate social responsibility means that organizations have moral, ethical,
and philanthropic responsibilities in addition to their responsibilities to earn
a fair return for investors and comply with the law.
A traditional view of the corporation suggests that its primary, if not sole,
responsibility is to its owners, or stockholders. However, CSR requires
organizations to adopt a broader view of its responsibilities that includes not
only stockholders, but many other constituencies as well, including
employees, suppliers, customers, the local community, local, state, and
federal governments, environmental groups, and other special interest
groups. Collectively, the various groups affected by the actions of an
organization are in some form stakeholders.
Discovering Core Values
The core identity of the organization
• Core values do not change over time and define an organization
• Define core values by finding what would not change regardless the outcome
• Core values are different for every organization
• Core values should be the bare essentials of the originations culture
• Core Purpose reflects the mission statement of the organization
• Purpose is the organization’s reason for being that reflects its ideals
• The purpose statement should inspire the organization’s members
• The core values and core purpose is a company’s anchor
• Other aspects may change while the values and purpose stay the same
• The values and purpose define the company culture
Code of Ethics
Key Points
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Controversial Points of a Code of Ethics
Benefits of a Code of Ethics
Code of Ethics Guidelines
What a Strong Code of Ethics Addresses
Code of Ethics
Controversial Points of a Code of Ethics
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Codes are to vague to be useful
Codes are not widely distributed or read
Codes are devolved as public relations documents designed solely to
improve an organization’s image
Codes don’t improve the ethical climate of organizations or produce
ethical behavior
Codes become the final word on the subject of ethics
Codes are hard to apply across cultures and in different situations
Codes lack adequate enforcement provisions
Codes fail to spell opt which ethical obligations should take priority
Adherence to codes often goes unrewarded
Code of Ethics
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Benefits of a Code of Ethics
An organization's ethical stance to its members and the world is
outlined
People can look to the code for guidance about the
organization’s ethical standards and values
Employees can learn potential ethical problems they may face
It can improve and protect the group’s image
It can encourage employees to resist unethical pressures
A written document can have a direct, positive influence on
ethical behavior to members of the organization
Code of Ethics
Code of Ethics Guidelines
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Identify what are ethical goal and ethical standards
Design the code for ordinary circumstances
Use clear language. Explain uncommon terms
Be logically coherent and prioritize obligations
• What commitments are most important
• Protect the larger community
• Focus on issues of importance to group members
• Address the organization's unique ethical dilemmas
• Provide guidance to the whole organization
• Explain consequences when the organization as a whole is unethical
• Outline the moral principals behind the code
• Explain why an action is right biased on ethical standards
• Encourage widespread input
• Back the code with reinforcement
• Create procedures for interoperating the code and applying sanctions
Code of Ethics
What a Strong Code of Ethics Addresses
• Conflict of interest
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When the employee benefits at the expense of the organization
• Records, funds and assets
• Organizations must keep accurate records to protect funds and other assets
• Information
• Liability if confidential information is revealed
• Outside relationships
• Contact with customers, suppliers, competitors, contractors, and other outside
organizations. Also includes provisions against bad-mouthing competition, pricefixing, and sharing sensitive information
• Employment practices
• Covers discrimination, sexual harassment, drug use, voluntary activities, and
related human resource issues
• Other practices
• Includes policies on health and safety, use of technology, environment, political
activities, and the use of organizational assets for personal benefit
Continuous Ethical Improvement
Ethics Training
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Focus on the origination's unique ethical problem
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Taps into the experiences of participants
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Encourage in-depth conversation and debate on ethical topics and issues
Get all participants involved in group discussion
Reinforces the organization’s ideology and standards
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Encourage trainees to reflect on their own values and moral moments
Ask for input when selecting issues to discuss
Make the trainees become the teachers
Actively engages participants
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Introduce examples from the specific industry and profession
Equip trainees with the resources needed to address those issues
Reinforce all components of ethical climate
Highlight the origination's group purpose and core values
Ethics are integrated into the entire training program
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Ethics are not a standalone topic
Integrate proper ethical behavior into all training sessions to help act with integrity
An organization that has an excellent
ethical climate - Wal-Mart Stores, Inc.
Dennis C. Daniels
PSC 785
April 26, 2015
Agenda
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Wal-Mart Headquarters
Mission Statement
Purpose
How did Wal-Mart achieve an
excellent ethical climate
Service to our Customers
Strive for Excellence
Act with Integrity
Sam Walton, Founder
Wal-Mart Headquarters
• The corporate headquarters of the world's largest retail company, WalMart, are located in Bentonville, AR, where founder Sam Walton
started it all.
Mission Statement
• We save people money so they can live better.
Purpose
• If we work together, we’ll lower the cost of living for everyone…we’ll
give the world an opportunity to see what it’s like to save and have a
better life.
How did Wal-Mart achieve an excellent
ethical climate
• Beliefs: Since Sam Walton founded the company, it always has been a
values-based, ethically led organization. The organization beliefs are
the values that guide decisions and leadership.
Service to our Customers
• At Wal-Mart we value every associate, own the work we do, and
communicate by listening and sharing ideas.
Strive for Excellence
• We work as a team and model positive examples while we innovate
and improve every day.
Act with Integrity
• We act with the highest level of integrity by being honest, fair and
objective, while operating in compliance with all laws and our policies.
We act with the highest level of integrity by being honest, fair and
objective, while operating in compliance with all laws and our policies.
Sam Walton: Founder
• Personal and moral integrity is one of our basic fundamentals and it
has to start with each of us. • Don’t compromise your reputation. It’s a precious commodity. Don’t
compromise your integrity… have a good name.
tyco and the Dennis
Kozlowski Story
Bobby Lane
PSC 785
About Tyco
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Founded in 1960
Investment and holding company specializing in solid-state science and energy
conversion, and would later enter the commercial sector.
Increased sales from $34 million to $500 million between 1973 and 1982.
By 2000, Tyco had acquired more than 30 major companies and was a major global
company.
The Crisis
By 2002:
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More than $170 million of company money had been spent on non-business related
expenses.
More than $430 million was stolen through fraudulent sales of Tyco stock.
Dennis Kozlowski
About
Life as CEO
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Began career at Tyco as an accountant
(30K Salary)
Found mentor in Joseph Gaziano (CEO)
who Dennis admired for his success and
lavish lifestyle.
Worked his way up the ranks and took
over as CEO in 1992.
Became known as the ‘corporate tough
guy, respected and feared in roughly
equal measure’.
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Followed in the footsteps of mentor
with his aggressive management style
and uncontrolled spending.
Acquired many other companies.
Increased annual returns year after
year.
In the beginning…
Aligning the Scam
Abusing Power
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Acquired ADT Security Services, a
company based in Bermuda.
– Sheltered foreign earnings from US
taxes.
Handpicked board of directors that
were ‘trusted’.
– #1 responsibility: Keep unethical or
inappropriate practices hidden
from shareholders.
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Terminated anyone who voiced
shortcomings of the company.
Forced acquired companies to eliminate
segments not profiting.
Gave millions of dollars in commission
to ‘trusted’ individuals.
Want vs Need: The Power of Greed
Dennis used Tyco’s money and loan programs (interest-free) for some
questionable expenses:
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Privately purchased luxury office space as unofficial headquarters
– $31 Million
Dennis’ Salary
– $170 Million
Fine Art
– $20 Million
Dennis’ Wife’s Birthday Party
– $2 Million
Dennis’ Home
– $30 Million
Philanthropy Contributions (In Dennis’ name)
– $43 Million
In the end…
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Board members found out others had been issued 10s of millions of dollars in bonuses
and began a corporate investigation that uncovered the scandal.
Kozlowski was indicted and found guilty of twenty-two charges. He is currently serving
his 25 year maximum sentence for the crimes.
Tyco’s Ethical Climate
• This is an example of how too much power in one individual can lead to
the destruction of an entire organization.
Signs of Ethical Collapse
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Maintain Numbers: Hiring of trusted employees to manipulate finances.
Fear and silence: The board members were bribed with additional compensation and bonuses leading them
to conduct unethical practices.
Weak Board: Corresponds to fear and silence. Dennis’ “tough guy” reputation also plays into this aspect.
Conflicts: In a company of 200 thousand employees, less than 10 knew specifics about the CEOs actions and
business practice.
Innovation: Being very successful– sometimes doubling yearly revenues– Dennis felt he should be rewarded
for his efforts.
References
Bianco, A. (2002). The Rise and Fall of Dennis Kozlowski. Retrieved from
http://www.ajbianco.com/the_rise_and_fall_of_dennis_kozlowski.php
Carroll, A.B., and A.K. Buchholtz. Business and Society: Ethics and Stakeholder
Management. 5th ed. Australia: Thomson South-Western, 2003.
Daniels Fund Ethics Initiative. (2011). Tyco International: Leadership Crisis. Retrieved from
http://danielsethics.mgt.unm.edu/pdf /Ty co%20Case.pdf