CH 7: Organizational Factors: The Role Of Ethical Culture And Relationships

Cultural Audit

•Assessment of an organization's values. •Usually conducted by outside consultants but may be performed internally as well. •Communication about ethical expectations and support from top management help to identify a corporate culture that encourages ethical conduct or leads to ethical conflict.

Integrative

•Combines a high concern for people and performance. An organization becomes integrative when superiors recognize employees are more than interchangeable parts—employees have an ineffable quality that helps the firm meet its performance criteria.

Coercive

•Penalizes actions or behavior and relies on fear to change behavior. More effective in changing behavior in short versus long run. Often employed where there is an extreme imbalance of power. People continually subjected to coercion may seek a counterbalance and align themselves with other, more powerful persons or leave the organization.

Value-based Ethical Cultures

•Relies on an explicit mission statement that defines the core values of the firm and how customers and employees should be treated. •Board of directors/upper management should add to value statements by formulating specific value statements for its strategic business units (SBU). •Certain areas may have rules associated with stated values, enabling employees to understand the relationship between the two. •The focus is on values such as trust, transparency, and respect to help employees identify and deal with ethical issues. •When using this approach, explain why rules exist, what the penalties are if rules are violated, and how employees can help improve the ethics of the company.

Whistle-blowing & legal protection

•Sarbanes-Oxley Act and The U.S. Department of Labor (DOL): directly protects whistle-blowers who report violations of the law and refuse to engage in any action made unlawful. •The Federal Sentencing Guidelines for Organizations (FSGO): If an employee provides information to the government about a company's wrongdoing under the Federal False Claims Act, the whistle-blower is known as a qui tam relator. Must have knowledge of wrongdoing that could damage society •The Corporate and Criminal Fraud Accountability Act (CCFA): protects employees of publicly traded firms from retaliation if they report violations of any rule or regulation to the Securities and Exchange Commission, or any provision of federal law relating to fraud against shareholders. It also requires attor- neys to become internal whistle-blowers as well. •Securities and Exchange Commission: •The Dodd-Frank Act:proposed additional incentives for whistle-blowers.

Corporate Culture

- Shared values, norms, and artifacts that influence employees and determine behavior, including ways of solving problems that members (employees) of an organization share. - Shared beliefs top MGT have and those beliefs manage and conduct themselves, employees, and their business - Can be expressed through gestures, looks, labels, promotions, and programs. Ethical leadership

Dimensions in an organization's culture

1. Concern for people—the organization's efforts to care for its employees' well-being. 2. Concern for performance—the organization's efforts to focus on output and employee productivity.

4 culture types

Apathetic, Caring, Exacting, and Integrative

Expert

Derived from a person's knowledge (or a perception that a person possesses knowledge). Usually stems from a superior's credibility with subordinates. Credibility (expert power), is positively correlated to the number of years a person worked in a firm or industry, education, and honors he/she has received for performance.

Referent

Exists when one person perceives that his/her goals or objectives are similar to another's with an attempt to influence the first to take actions that allows both to achieve their objectives. Identification with others helps boost the decision maker's confidence, thus increasing the referent power.

Whistle-blowing

Exposing an employer's wrongdoing to outsiders such as the media or government regulatory agencies.

Caring

High concern for people but minimal concern for performance issues. Of course might seem best from an ethical standpoint but no company can ignore performance.

Apathetic

Minimal concern for either people or performance. Individuals focus on their own self-interest.

EQ 5: Coercive power works in the same manner as reward power.

No. Coercive power is the opposite of reward power. One offers rewards and the other responds with punishment to encourage appropriate behavior.

EQ 4: An integrative culture shows high concern for performance and little concern for people.

No. This describes an exacting culture. An integrative culture combines a high concern for people with a high concern for production.

Five Power Bases

Reward, coercive, legitimate, expert, and referent

Sarbanes-Oxley 404

Section 404 requires firms to adopt a set of values that forms a portion of the company's culture. - Its purpose is to expose unethical behavior

Legitimate

Stems from the belief that a certain person has the right to exert influence and certain others have an obligation to accept it (titles and positions of authority).

Variation in Employee Conduct

Top 10%: follow their own values/beliefs. They superior to those of the company 40%: Always try to follow company policies 40%: Go along with the work group Bottom 10%: Take advantage of situations if the penalty is less than the benefit and the risk of being caught is low

EQ 2: Decentralized organizations give employees extensive decision-making autonomy.

Yes. This is known as empowerment.

EQ 3: Corporate culture provides rules that govern behavior within the organization.

Yes. Values, beliefs, customs, and ceremonies represent what is acceptable and unacceptable in the organization.

Differential Association

is 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.

EQ 1: Decentralized organizations tend to put the blame for unethical behavior on lower-level personnel.

no. This is more likely to occur in centralized organizations.

Compliance-based Ethical Culture

organized around risk. Compliance-based cultures use a legalistic approach to ethics. They use laws and regula-tory rules to create codes and requirements. Codes of conduct are established with compliance as their focus, with rules and policies enforced by management. Instead of revolving around an ethical culture, the company revolves around risk management. - Its good in short term - It lacks long term focus on values and integrity - It does not teach employees to navigate ethical gray areas

Exacting

shows little concern for people but a high concern for performance; it focuses on the interests of the organization.

Ethics & Corporate Culture

•A significant factor in ethical decision making. •Culture dictates hiring people with specific, similar values. •If a company's primary objective is to make as much profit as possible through whatever means, its culture may foster behavior that conflicts with stakeholders' ethical values. •If an organization values ethical behavior, it rewards them thru recognition and awards in a consistent and balanced manner. •All performance at the threshold level should be acknowledged, and praise or rewards given as close to the performance as possible.

Reward

•Ability to influence the behavior of others by offering them something desirable (money, status, or promotion).