1. Chapter 7 Organizational Factors: The Role of Ethical Culture and Relationships

2. Learning Objectives Understand the concept of corporate culture
Examine the influence of corporate culture on business ethics
Determine how leadership, power, and motivation relate to ethical decision making in organizations

3. Learning Objectives (continued)
Assess organizational structure and its relationship to business ethics
Explore how the work group influences ethical decisions
Discuss the relationship between individual and group ethical decision making

4. Corporate Culture
Values, beliefs, rules, and ceremonies that are accepted, shared, and circulated throughout an organization
Sarbanes–Oxley 404
Requires firms to adopt a set of values that forms a portion of the company’s culture
Associated with a company’s success or failure

5. Types of Organizational Cultures
Apathetic culture
Minimal concern for either people or performance
Caring culture
High concern for people but minimal concern for performance issues

6. Types of Organizational Cultures (continued)
Exacting culture
Little concern for people but high concern for performance
Integrative culture
High concern for people and performance

7. Ethics as a Component of Corporate Culture
Firm’s culture forms the basis of ethical decision making
Management’s sense of an organization’s culture might differ from that of the firm’s employees
Higher-level managers need to monitor the organization’s values, traditions, and beliefs to ensure they represent the desired culture
Rewards and punishments imposed by an organization should reflect the culture the top management wishes to create

8. Compliance versus Values-Based Ethical Cultures
Uses laws and regulatory rules to create compliance codes and requirements
Compliance culture
Relies on a mission statement that defines the core values of the firm and how customers and employees should be treated
Values-based ethics culture

9. Differential Association and Whistle-Blowing
Differential association: Idea that people learn ethical or unethical behavior while interacting with people who are part of their intimate personal groups
Legal protection for whistle-blowers exists to encourage reporting of misconduct
Sarbanes–Oxley Act and the Federal Sentencing Guidelines for Organizations (FSGO)
Criminal Fraud Accountability Act (CCFA)
Dodd–Frank Act

10. Role of Power in Shaping Corporate Culture
Power - Influence leaders and managers have over the behavior and decisions of their subordinates
Power bases
Reward power
Coercive power
Legitimate power
Expert power
Referent power

11. Motivating Ethical Behavior
Leader’s ability in motivating his or her subordinates plays a role in maintaining an ethical organization
Job performance is the product of motivation and ability
An individual’s hierarchy of needs may influence his or her motivation and ethical behavior
After basic needs and survival needs are satisfied, relatedness needs and growth needs become important

12. Organizational Structure
Centralized organization
Decentralized organization
Decision-making authority is concentrated in the top-level management
Codes of ethics specify the techniques used for decision making by management
Distance between managers and decision-makers may lead to unethical acts
Decision-making authority is delegated down the chain of command
Has fewer internal controls and uses shared values for their ethical standards
Ambiguity in following a rule versus the spirit of rules creates ethical challenges

13. Groups
Formal group: Assembly of individuals with an organized structure that is explicitly accepted by the group
Committees, work groups, and teams
Informal group: Composed of individuals who have similar interests and band together for purposes that may or may not be relevant to the goals of the organization
Group norms: Standards of behavior that groups expect of their members

14. Table 7.7 -Variation in Employee Conduct

15. People’s Control over their Actions Within a Corporate Culture
Ethical decisions within organizations are made by committees and formal and informal groups, not by individuals
Employees in bureaucratic organizations have limited knowledge about the basic rules and procedures of the company
When ethical conflict is severe, the individual may have to decide whether to leave the organization