This PowerPoint presentation is helpful for business student. This presentation covers the topic of organizational factor in business ethics.

1. CHAPTER 07.
Organizational factors: The role of
ethical culture & relationships

2. Main Objective
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
• Definitions
 Culture: A set of values, norms, and artifact including ways of solving problem shared
by organizational members.
 Corporate culture: The shared beliefs top manager in the company have about how
they should manage themselves and other employee, how they should conduct their
business.
 Corporate culture include the behavioral pattern, concepts, values, ceremonies, and
rituals that take place in the organization.
All organizations have culture

4. Corporate Culture
• May be formal 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, Promotion, Extracurricular activities

5. Continue…
• The tone at the top:
It's a determining factor in the creation of a high- integrity organization. When leaders are
perceived as trustworthy, employee trust increases; leaders are seen as ethical and as
honoring a high level of duties.
 In a survey of chief financial officers, CFOs were asked what traits they look for when
training future leaders of their organizations. The most popular answer was integrity. It
is interesting to note that integrity was listed as more important than business savvy or
the ability to motivate others. In fact , integrity is included more than any other core
value by organizations.

6. Organizational culture types
High
Low
High
Low
Caring
Ben and jerry’s
Exacting
United Parcel System
Integrative
Starbucks
Apathetic
Countrywide financial
Concern for
people
Concern for performance
• Two dimensions
Concern for people
Concern for performance

7. Ethics and Corporate Culture
• Significant factor in ethical decision making
• If a firm’s culture encourage/rewards/des not monitor unethical behavior,
its employees may act unethically.
• Ethical issue can arise because of conflict between the culture perceived by
management and that actually at work in the organization.

8. Compliance vs.. Value base culture
• Compliance based cultures use their legal departments to determine
ethical risk.
 Remove around risk management, not ethics
 Lack of long-term focus and integrity
• Value-based cultures relies on an explicit mission statement that defines the
firm and stakeholder relations
 Focus on values, not laws
 Top-down integrity is critical

9. 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 strong influence on subordinates
Employee may go along with superiors’ moral judgment to show loyalty

10. Whistle Blowing
• Exposing an employer’s wrongdoing to outsiders (external to the company)
- Some legal protection exist
- e.g. the Media or Government regulatory agencies
• Interpersonal conflict ensues when employees think they know the right
course of action, yet the company promote a different decision
• The Sarbanes-Oxley Act and the FSGO has institutionalized whistle-blowing to
encourage discovery of misconduct.
• - whistle-blower fear retaliation

11. 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 refer to the influence that leaders and managers have over the behavior and
decision of subordinates
 An individual has power when his/her presence cause people to behave differently.
Power and influence shape corporate culture

12. Five Power Bases
1. Reward power:
• Offering something desirable to influence behavior.
2. Coercive power:
• Penalizing negative behavior.
3. Legitimate power:
• The consensus that a person has the right to exert influence over others.
4. Expert power:
• Derives from knowledge and credibility with subordinates
5. Referent power:
• Exist when goals or objectives are similar.

13. Motivating Ethical Behavior
• Motivation is a force within individual that focuses behavior toward
achieving goals.
• Job performance: A function of ability and motivation
• An individual’s hierarchy of needs may influence motivation and ethical behavior.
• Relatedness needs: Satisfied by social and interpersonal relationship
• Growth needs: Satisfied by creative or productive activities.
Needs or goals may change over time

14. Organization Structure
• Centralized organizational structure
Decision making authority is concentrated in the hands of top-level managers.
• Little authority delegated t lower levels
• Best for organizations
• They 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
Example:
• General motors
• Proctors and gamble

15. Continue…
• Decentralized organizational structure:
Decision making authority is delegated as far as down the chain of command as possible.
 Flexible and quicker to recognize external change
 Can be slow to recognize organizational policy change
Unit may diverse and develop different value systems
• Ethical misconduct may result
Example:
• Nike
• Southwest airlines
• Microsoft

16. Characteristics Centralized Decentralized
Hierarchy of authority Centralized Decentralized
Flexibility Low High
Adaptability Low High
Problem recognition Low High
Implementation High Low
Dealing with changes Poor environment complexity Good
Rules and Procedure Many and formal Few and informal
Division of labor Clear-cut Ambiguous
Span of control Many employee Few employee
Use of managerial techniques Extensive Minimal
Coordination and control Formal and impersonal Informal and personal

17. Group dimension of corporate structure &
culture
• Types of group
1. Formal groups:
 Committees, work groups, and teams
2. Informal groups:
 The grapevine
• Group norms:
 Standards of behavior that groups expect of members
 Define acceptable/unacceptable behavior within the group

18. Variation in employee conduct
10% 40% 40% 10%
Follow their own
values and belief;
believes that their
values are superior to
those of others in the
company.
Always try to follow
company policies.
Go along with the
work group.
Take advantages of
situations, if the
penalty is less than the
benefit and the risk of
being caught is low.
 These percentages are based on a number of studies in the popular press and data gathered
by the authors. They are not exact and represent a general typology that may vary by
organization.

19. Can people control their own actions
• Ethical decisions are often made by committees and formal and informal
groups.
 Many decisions are beyond the influence of individual
• Congruence between individual and organizational ethics-increase potential
for making ethical decision
Individuals need experience to understand how to resolve ethical issue.

20. Thank you