Creating an Ethical Climate Paul C. Godfrey Marriott School of Management

If we look within the organization and identify the individual who seems most closely connected with the harm—for instance, the foreman who orders the workers down the dangerous mine shaft or the corporate executive who orders the marketing of an unsafe drug—we do not find an individual whom we recognize as evil but someone who looks rather like us. --J. M. Darly (in Anand,Ashforth, and Joshi, 2004)

Q: A:

Warm Water: Rationalizations Denial of Responsibility –Industry practices (the rules of the game) –Corporate authority (my hands were tied) Denial of Injury –Willing participants (they knew what they were getting into) Appeal to Higher Loyalties –Survival (this is war)

Warm Water: Shading socializations Incrementalism –Downplay harms or evils –Shades of grey Euphemistic Language –Political correctness –Shading the truth Social Cocoon –Insulation –Shaded from view

So, how do you create an ethical climate???

Strategy StructureSystems Shared Values StaffingSkills Style The 7 S Model

Strategy Organizational Goals Competitive Advantages StructureSystems Division of Labor Reporting responsibilities Coordination Control Shared Values Common Belief Priorities StaffingSkills Hiring, Training, Promoting Technologies What we do well Style Interpersonal relationships

Shared Values Have a mission statement Be mission driven (built to last) Code of ethics Code of conduct Values that are shared CSR reporting, transparency reports

Merck & Mectizan “We are in the business of preserving and improving human life. All our actions must be measured by our success in achieving this goal.” Late 1970’s: Researchers isolate drug that cures river blindness River-blindness affects 1 Million worldwide Those who need it can’t pay Would a donation set a bad precedent? 1987: Merck announces donation of Mectizan around the world “Medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear.” George W. Merck (1950)

Strategy Ethics as a cost & constraint (Enron) Ethics as compliance & citizenship (Intel) Ethics as a competitive advantage (Whole Foods) Value Time

Structure and Systems Corporate ethics officer Compliance office and staff Where to locate –Investor relations –Public relations –General counsel –Independent office Defensive systems –Hotlines –Reporting structures –Compliance reviews Offensive systems –Performance reviews and compensation –CSR and initiatives

Staff and Skills Training New and ongoing for employees Conferences and workshops Sharing best practices

Style The tone at the top Ethical leadership

Example: Boeing A Boeing Leader: Charts the course Sets high expectations Inspires others Finds a way Lives the Boeing values Delivers results No tradeoff between performance and values

Building in time vs. over time Ethics is a part of culture Culture takes a long time to build or change Culture becomes unseen and taken for granted Ethics can be neither to be effective