Business ethics

1. Organizational Factors: The
Role of Culture and
Relationships
C H A P T E R 7
Ethical Decision Making for Business 8e Fraedrich/ Ferrell/ Ferrell

2. Chapter Outline
• Defining Corporate Culture
• The Role of Corporate Culture in Ethical Decision
Making
• Leaders Influence Corporate Culture
• Motivating Ethical Behavior
• Organizational Structure and Business Ethics
• Group Dimensions of Corporate Structure and Culture
• Variation in Employee Conduct
• Can People Control Their Own Actions
• Within a Corporate Culture?

3. Ethical Corporate Culture
• Corporate culture includes the behavioral patterns,
concepts, values, ceremonies, and rituals that take
place in the organization.

4. Corporate Culture
• May be formal statements of values, beliefs, and
customs
• May be informal through direct or indirect comments
conveying management’s wishes
• Two dimensions
– Concern for people
– Concern for performance

5. Four Organizational Culture Types
• Apathetic (People)
• Caring (People)
• Exacting (Performance)
• Integrative (People and Performance)
A cultural audit is an assessment
of the organization’s values

6. Compliance Versus Value-Based
Culture
• Compliance-based cultures use their legal
departments to determine ethical risk
• Values-based cultures relies on an explicit mission
statement that defines the firm and stakeholder
relations

7. Differential Association
• The idea that people learn ethical/unethical behavior
while interacting with others

8. Whistle Blowing
• Exposing an employer’s wrongdoing to outsiders
(external to the company)
• The Sarbanes–Oxley Act and the FSGO has
institutionalized whistle-blowing to encourage
discovery of misconduct

9. Leaders Can Influence Corporate
Culture
• 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

10. 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
• Needs or goals may change over time

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

12. Groups in Corporate Structure and
Culture
• Formal groups
• Informal groups
• Group norms

13. 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