Business ethics ethical decision making and case 10e chapter 7

Part I: AN OVERVIEW OF BUSINESS ETHICS. 1. The Importance of Business Ethics. 2. Stakeholder Relationships, Social Responsibility, and Corporate Governance. Part II: ETHICAL ISSUES AND THE INSTITUTIONALIZATION OF BUSINESS ETHICS. 3. Emerging Business Ethics Issues. 4. The Institutionalization of Business Ethics. Part III: THE DECISION-MAKING PROCESS. 5. Ethical Decision Making and Ethical Leadership. 6. Individual Factors: Moral Philosophies and Values. 7. Organizational Factors: The Role of Ethical Culture and Relationships. Part IV: IMPLEMENTING BUSINESS ETHICS IN A GLOBAL ECONOMY. 8. Developing an Effective Ethics Program. 9. Managing and Controlling Ethics Programs. 10. Ethical Leadership. 11. Business Ethics in a Global Economy. 12. Sustainability: Ethical and Social Responsibility Dimensions Part V: CASES. CASE 1. Monsanto Attempts to Balance Stakeholder Interests. CASE 2. Starbucks'''' Mission: Social Responsibility and Brand Strength. CASE 3. Walmart Manages Ethical and Compliance Challenges. CASE 4. Managing Risks in the Oil Industry. CASE 5. New Belgium Brewing: Ethical and Environmental Responsibility. CASE 6. National Collegiate Athletic Association: Football Compliance. CASE 7. Google: The Quest to Balance Privacy with Profits. CASE 8. Zappos: Delivering Happiness to Stakeholders. CASE 9. Enron: Questionable Accounting Leads to Collapse. CASE 10. Home Depot Implements Stakeholder Orientation. CASE 11. Frauds of the Century. CASE 12. Insider Trading at the Galleon Group. CASE 13. Whole Foods Strives to Be an Ethical Corporate Citizen. CASE 14. Apple Inc.''''s Ethical Successes and Challenges. CASE 15. PepsiCo''''s Journey Toward an Ethical and Socially Responsible Culture. CASE 16. Recreational Equipment Incorporated (REI): A Responsible Retail Cooperative. CASE 17. Better Business Bureau: Protecting Consumers and Dealing with Organizational Ethics Challenges. CASE 18. Managing the Risks of Bribery in Global Business. CASE 19. Mattel Responds to Ethical Challenges. CASE 20. Best Buy Fights Against Electronic Waste.

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

Part Three The Decision Making Process

Defining Corporate

Culture

Corporate culture has many

definitions

 A set of values, norms, and artifacts,

including ways of solving problems shared

by organizational members

 The shared beliefs top mangers have

about how they should manage themselves and other employees and how they should conduct their business

 Gives organizational members meaning

and sets the internal rules of behavior

Sarbanes-Oxley 404

Culture is codified by the

Sarbanes-Oxley 404 compliance section

 Includes assessment of effectiveness of

controls by management and external auditors

 Forces firms to adopt a set of values

that make up part of the culture

 Compliance with 404 requires cultural

change, not only accounting changes

Culture

 May be formal through statements of

values, beliefs, and customs

 Comes from upper management

 Memos, codes, manuals, forms, ceremonies

 May be informal through direct or indirect

comments conveying management’s wishes

 Dress codes, promotions, extracurricular activities

 The “tone at the top” is critical in creating

ethical corporate culture

U.S Bank’s Principles

For Integrity

 Being a role model for ethical behavior

 Promoting our culture of integrity

 Fostering open communication

 Recognizing behavior that exemplifies our ethical

principles and values

 Responding to misconduct and reporting violations

Source: U.S Bank, Do the Right Thing: Code of Ethics and Business

Conduct , https://www.usbank.com/hr/docs/policies/coeHandbook.pdf (accessed

March 8, 2011).

Two Dimensions of Organizational Culture

 The organization’s efforts to care for its

employees’ well-being

 The organization’s efforts to focus on

output and employee productivity

Traits to Look for in

Future Leaders

Source: “Robert Half Management Resources Survey: CFOs Cite Integrity as Most Important Trait for

Future Leaders,” PR Newswire, September 30,

http://www.prnewswire.com/news-releases/robert-half-

management-resources-survey-cfos-cite-integrity-as-most-important-trait-for-future-leaders-104072008.html (accessed April 26, 2013).

 Apathetic: Minimal concern for

people or performance

 Caring: High concern for people;

minimal concern for performance

 Exacting: Minimal concern for

people; high concern for performance

 Integrative: High concern for people

and performance

Four Organizational

Culture Types

A cultural audit is an assessment

of the organization’s values

consultants; can be handled internally

Four Organizational

Culture Types

Company Examples of the Four Organizational Cultures

 Ethical corporate culture is a

significant factor in ethical decision making

 Compliance-based cultures use a

legalistic approach to ethics

 Revolve around risk management, not

ethics

 Lack of long-term focus and integrity

statements that define the firm and stakeholder relations

 Focus on values, not laws

 Top-down integrity is critical

Compliance versus Value-Based Cultures

Differential Association

The idea that people learn

ethical/unethical behavior while

interacting with others

 Studies support that differential

association supports ethical decision making

 Superiors have a strong influence on

subordinates

 Employees may go along with

superiors’ moral judgments to show loyalty

Exposing an employer’s

wrongdoing to company outsiders

and the Dodd-Frank Act have institutionalized whistle-blowing protections to encourage discovery of misconduct

 Whistle-blowers fear retaliation

Questions to Ask before Engaging

in External Whistle-Blowing

1 Have I exhausted internal anonymous reporting

opportunities within the organization?

2 Have I examined company policies and codes that outline

acceptable behavior and violations of standards?

3 Is this a personal issue that should be resolved through

other means?

4 Can I manage the stress that may result from exposing

potential wrongdoing in the organization?

5 Can I deal with the consequences of resolving an ethical or

legal conflict within the organization?

Percentage of Employees Who Experience Retaliation after Reporting Misconduct

Source: Ethics Resource Center, 2011 National Business Ethics Survey: Workplace Ethics in Transition

How Employees Report Observed

212.indd 195 13/07/13 5:14 PM

23715_ch07_lores_181-Leaders Influence Corporate Culture

 An effective leader is one who does well

for the stakeholders of the corporation

 Effective leaders are good at getting followers

to common goals effectively and efficiently

 Power refers to the influence that leaders

and managers have over the behavior and decisions of subordinates

 A individual has power when his/her presence causes people to behave differently

 Power and influence shape corporate

culture

Five Power

Bases

 Reward power: Offering something

desirable to influence behavior

 Coercive power: Penalizing negative

behavior

 Legitimate power: The consensus that

a person has the right to exert influence over others

 Expert power: Derives from knowledge

and credibility with subordinates

 Referent power: Exists when goals or

objectives are similar

A force within the individual that focuses

behavior toward achieving a goal

and motivation

 An individual’s hierarchy of needs may

influence motivation and ethical behavior

 Relatedness needs: Satisfied by social and

interpersonal relationships

 Growth needs: Satisfied by creative or

productive activities

Centralized Organizational Structure

Decision making authority is

concentrated in the hands of top-level

managers

 Little authority delegated to lower levels

 Best for organizations…

 That make high-risk decisions

 Whose lower-level managers are not

skilled in decision-making

 Where processes are routine

 May have a harder time responding to

ethical issues

Decentralized Organizational Structure

Decision making authority is delegated

as far down the chain of command as

Structural Comparison of Organizational Types Emphasis

Characteristic Centralized Decentralized

Hierarchy of authority Centralized Decentralized

Dealing with changes environmental Poor

Rules and procedures Many and formal Few and informal

Use of managerial

Coordination and control Formal and impersonal Informal and personal

Examples of Centralized and Decentralized Corporate Cultures

Examples of Centralized and Decentralized Corporate Cultures

Company Organization al Culture Characterized by

Nike Decentralized Creativity, freedom, informality

Southwest Airlines Decentralized Fun, teamwork orientation, loyalty

General Motors Centralized Unions, adherence to task assignments, structured

Microsoft Decentralized Creative, investigative, fast paced

Proctor &

Experienced, dependable, a rich history and tradition of

products, powerful

Groups in Corporate Structure and Culture

 Define acceptable/unacceptable behavior

within the group

Variation in Employee Conduct*

* Estimates based on the author’s research and reports from ethics and

compliance officers from many industries 23715_ch07_lores_181-212.indd 205

company policies

Go along with the work

group

Take advantage of situations if the penalty is less than the benefit and the risk of being caught

is low

Can People Control Their Actions

Within a Corporate Culture?

Ethical decisions are often made by

committees and formal and informal groups

 Many decisions are beyond the

influence of individuals

 Congruence between individual and

organizational ethics—increases potential for making ethical decisions

 Individuals need experience to

understand how to resolve ethical