1. Organizational Factors: The Role of Culture and Relationships
C H A P T E R 7
Organizational Factors: The Role of Culture and Relationships

2. Ethical Corporate Culture
Corporate culture includes the behavioral patterns, concepts, values, ceremonies, and rituals that take place in the organization
Gives members of the organization meaning and the internal rules of behavior
All organizations have culture
Source: © Jack Hollingsworth/Corbis

3. Corporate Culture
May be formal statements of values, beliefs, and customs
Coming from upper management in the form of memos, codes, manuals, forms and ceremonies
May be informal through direct or indirect comments conveying management’s wishes
Dress codes, promotions, extracurricular activities

4. Two Dimensions of Organizational Culture
Concern for people
The organization’s efforts to care for its employees’ well-being
Concern for performance
The organization’s efforts to focus on output and employee productivity
Source: Digital Vision

5. Perceived Tone and Culture of the CEO and Other Executives

6. Four Organizational Culture Types
Apathetic: Shows minimal concern for people or performance
Caring: Exhibits high concern for people, but minimal concern for performance
Exacting: Shows little concern for people, but high concern for performance
Integrative: High concern for people and performance
A cultural audit is an assessment of the organization’s values
Usually conducted by outside consultants

7. A Framework of Organizational Culture Typologies

8. Ethics and Corporate Culture
Corporate culture is a significant factor in ethical decision making
If a firm’s culture encourages/rewards/does not monitor unethical behavior, its employees may act unethically
Ethical issues can arise because of conflicts between the culture perceived by management and that actually at work in the organization
Source: Digital Vision

9. Compliance versus Value-Based Culture
Compliance-based cultures use their legal departments to determine ethical risk
Revolves around risk management, not ethics
Values-based cultures relies on an explicit mission statement that defines the firm and stakeholder relations
Focus on values, not laws

10. Differential Association
The idea that people learn ethical/unethical behavior while interacting with others
Studies support that differential association affects ethical decision making
Superiors have a strong influence on subordinates
Source: S. Pearce/PhotoLink

11. Whistle Blowing
Exposing an employer’s wrongdoing to outsiders (external to the company)
e.g. the media or government regulatory agencies
Interpersonal conflict ensues when employees think they know the right course of action, yet the company promotes a different decision
The Sarbanes–Oxley Act and the FSGO has institutionalized whistle-blowing to encourage discovery of misconduct

12. Reasons Why Employees Do Not Report Misconduct
Some employees remain reticent to be a
whistle blower and to report misconduct.

13. Leaders Can Influence Corporate Culture
Power refers to the influence that leaders and managers have over the behavior and decisions of subordinates.
An individual has power when his/her presence causes people to behave differently
Power and influence shape corporate culture
Source: Triangle Images

14. Five Power Bases
Reward power: Offering something desirable to influence behavior
Coercive power: Penalizing negative behavior
Legitimate power: Titles and positions of authority
Expert power: Knowledge based
Referent power: Exists when goals or objectives are similar

15. Motivation
A force within the individual that focuses behavior toward achieving a goal
An individual’s hierarchy of needs may influence motivation and ethical behavior
Relatedness needs are satisfied by social and interpersonal relationships.
Growth needs are satisfied by creative or productive activities.
Needs or goals may change over time

16. Organizational Structure and Business Ethics
In a centralized organization, decision-making authority is concentrated in the hands of top-level managers
Little authority delegated to lower levels
In a decentralized organization, decision-making authority is delegated as far down the chain of command as possible

17. Examples of Centralized/Decentralized Corporate Cultures

18. Groups in Corporate Structure and Culture
Formal groups
Committees, work groups and teams
Informal groups
The “grapevine”
Group norms
Standards of behavior acceptable in the group
Define acceptable/unacceptable behavior within the group

19. Variation in Employee Conduct (The 10/40/40/10 Rule)

20. Can People Control Their Own Actions Within a Corporate Culture?
Organizational ethical decisions often made by committees and formal and informal groups
Many decisions are beyond the influence of individuals
Individuals entering the business will need several years of experience to understand how to resolve ethical issues

21. The Importance of Corporate Culture
According to the Ethics Resource Center, corporate culture is the number one most important factor in limiting misconduct
Executives must make maintaining an ethical culture a top priority
Source: © Jack Hollingsworth/Corbis