CODE OF ETHICS AND BUSINESS CONDUCT

LEARNING OBJECTIVES
At the end of this lesson, the students should be able to:
• Explain the importance of Code of Ethics and Corporate Culture
• Narrate how ethical cultures can be created in business organization
• Write own personal code of ethics

ACTIVITY 1
Write down 25 characteristics that you have. May it be negative or positive.

During the previous sessions we’ve learned that ethics is a set of moral standards for judging something
good or bad. But this can be easily understood if we are to recognize the ethical issues that is pressing.
An ethical issue is a situation where someone must choose between a set of actions that may be ethical
or unethical. American ethical codes were first called creeds or credos and those in the 1980s were
considered “legalistic” and “more likely to talk about ethics or the reputation of the company” (Benson,
1989); they showed concern over issues like affirmative actions.

So that the business is aided on how to deal with ethical issues or ethical dilemmas, code of ethics
exists. Watch a video using the link below:

https://www.youtube.com/watch?v=-gRLHf6ZBM4

CODE OF ETHICS

Written documents which attempt to state the major philosophical principles and articulate the values
embraced by the organization. (Stevens, 1996)

policy documents defining responsibilities of the organization to stakeholders and articulating the
conduct expected of employees. (Kaptein&Wempe, 2002)

note codes contain open guidelines describing desirable behaviors. (Nijhof et al. 2003)
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as instruments to enhance social responsibility, codes clarify the norms and values the organization
seeks to uphold. (Kaptein, 2004)

CODE OF ETHICS is being defined in multiple ways but the most important thing is that
it is the guiding principles designed to help professionals conduct business honestly and with integrity.
The document may outline the mission and values of the business or organization, how professionals
are supposed to approach problems, the ethical principles based on the organization's core values,
and the standards to which the professional is held.

4 TYPES OF ORGANIZATIONAL CULTURE IN SAUSER'S (2008) TAXONOMY:

1. Culture of Defiance

An organizational culture that emphasizes a scorning defiance of the law and other ethical
standards and seeks to resist or defy them whenever possible. Cutting ethical comers, breaking the
law when likelihood of detection is perceived to be low (or reward for breaking the law is gauged to be
high enough to risk the consequences), and other such tactics would be rewarded and encouraged in
this type of culture.

2. Culture of Compliance

An organizational culture that emphasizes yielding to laws and other ethical standards that the
organization's leaders and members do not necessarily accept. Within this type of culture, leaders and
members do grudgingly take actions designed to meet their legal and ethical requirements, but do not
accept and incorporate these standards within their own value system.

3. Culture of Neglect

An organizational culture in which leaders fail in their responsibility of due diligence toward moral
and ethical concerns. Such shortcoming might include a failure to know or understand the laws and
ethical codes regulating the business, a failure adequately to communicate those standards, a failure
to detect and/or punish wrongdoers within the firm, or even a certain blindness within the culture,
caused by one or more tragic flaws, that leads to unintentional moral failure.

4. Culture of Character

An organizational culture in which leaders and members are truly committed to ethical conduct
and make ethical behavior a fundamental component of their every action. Leaders of cultures of
character are constantly vigilant to detect and correct ethical shortcoming on the part of themselves or
their employees, because they have internalized the spirit as well as the letter of the laws and ethical
standards governing the organization's actions.

Among the four types of organizational culture of Sauser’s (2008) Taxonomy, the culture of character
is ideal. This is the organizational culture whose leaders and members, according to Sims (2005), “are
truly committed to ethical conduct and make ethical behavior a fundamental component of their every
action. They put a stake in the ground, explicitly stating what the organization intends and expects.
Value statements and codes of ethical conduct are used as a benchmark for judging both organizational

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policies and every individual's conduct. They do not forget that trust, integrity, and fairness do matter,
and they are crucial to everyone in the organization”.

The former ethics director of Texas Instruments Carl Skoogland (2003), argues: "Ethical managers
must know what is right, value what is right, and do what is right."

Turknett and Turknett (2002) provide this definition of a company with character, "Like people with
character they get results, but they do it with integrity and a respect for people. Like people with
character, companies with character are able to balance accountability and courage with humility and
respect."

ACTIVITY 2
Below your listing, separate the desirable and the inappropriate characters
in a column

What is CORPORATE CULTURE

Corporate culture is often defined as a set of shared beliefs and values that influence the behaviors
and actions of employees. It can also be helpful to think of culture as the personality of the organization
the combination of a company's history, vision, people, and environment.

KEY COMPONENTS:

Vision and Values

The backbone of an organization's culture is the organization's vision and purpose and how
these things will help it survive and compete in the market. Values describe the employee
behaviors and mindset required to achieve the company vision. Together, the vision and values
serve as guidelines for how employees are expected to lead, behave, and communicate.

Practices and People

Perhaps the most important component of corporate culture is the people ---the "culture carriers”.
Customers, prospective hires, and other stakeholders will understand your company
culture from their interactions with and observations of employees. Because employee
behaviors impact corporate culture, targeted skills training can be used to teach employees the
behaviors support the culture you want to build.

Employee behaviors, both innate and learned, define corporate culture. Some examples include:

• Traits and skills of leaders: the degree to which individuals lead by example and cultivate desired
behaviors in others.
• Communication: how employees share information and deliver feedback.
• Camaraderie: how employees have fun and build a sense of community within the
organization.
• Teamwork/collaboration: the degree to which individual input and perspective is respected and
considered in group problem-solving and decision-making.

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Narrative

Every organization has a unique story that undeniably shapes its culture. When elements of
the company's narrative are shared and retold over time, they become a significant part of the
culture.

Examples of narrative/storytelling activities that help shape corporate culture include:

• Celebrations that remind employees of important company milestones and successes

• Rituals and routines, such as annual meetings, that recognize newly promoted employees, or a
program that brings a special guest to speak to employees at the same time each year
• Company folklore and legends

Environment/Place

The environment in which people do their work, collaborate, and make decisions is a critical
component of corporate culture. For example, geographic regions tend to attract different
kinds of companies and employees, as in the case of Silicon Valley for tech firms. Within
companies, location can help shape culture as well. Trading floors in brokerage firms engender
a culture of loud conversation and a lightning-fast pace of work. In many office environments,
flexible-use gathering places and conference-type rooms support a collaborative culture among
employees.

While there may be many answers to the question "what is corporate culture?", it is ultimately shaped
by the vision and values that drive the behaviors and attitudes of the people involved. All of the
components of corporate culture are impacted by important decisions you make and the type of culture
you want to build. You can achieve your desired culture with a mix of training and other activities that
impact employee behavior. In addition, a culture transformation may necessary in order to achieve
larger organizational culture goals.

5 ELEMENTS OF A GREAT CORPORATE CULTURE

(1) Mission and Vision

Your corporate culture begins with establishing a mission statement that aligns with your
corporate vision. It should define what your company wants to accomplish, how this should be
done, who your market is, and the value you provide to them. This gives everyone on staff a
purpose and perspective in keeping on-message.
Having a clearly-defined mission helps to align every business decision to core values. An
effective and inspirational mission statement can also inform customers, contractors and supply
chains what your needs and expectations are and how you deliver on your promise.

For your mission statement to be effective, it needs to follow all aspects of the business every
single day. It does your company more harm than good to proclaim a culture of customer
satisfaction and then provide minimal or inaccessible customer service or avoid accountability.
Word of mouth, especially online, travels fast so that lack of conviction in your own
practices is a betrayal of trust.

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(2) Values
The most fundamental aspect of a positive company culture is a declaration of the principles you
strive for. Both your employees and customers will be relying on your faithful observance
of qualities like integrity, honesty, and respect

Honesty is crucial to building trust. Open communication and transparency of corporate policy
helps to prevent misunderstandings. Organizations that make promises they don't keep, engage
in misleading advertising, illegal activity, or don't honor their own policies will appear dishonest.

Part of a strong company culture is making thoughtful decisions, and then sticking by every deal
and promise you make to workers, clients, or partners. Knowing that your promises are
guarantees inspires confidence and appreciation in everyone connected to your organization

(3) Work Environment

Your employees will feel more loyalty and motivation within a culture that represents a pleasant
and nurturing environment. Employees need incentive, inspiration, and a work environment
where they feel secure and comfortable.

However, wages and other monetary rewards are not always the strongest motivators. Your
incentive plan needs to be customized to your workforce on a personal level. Recognize and
reward exceptional performance and dedication.

When the team exceeds goals and earns notable successes, take the time to celebrate and
express gratitude for their achievements. Give feedback on performance, provide additional
training as needed and focus on making work an enjoyable experience. This will keep employees
engaged and encourage them to meet higher standards.

(4) Communication
Open communication across departments and command chains is one of the staples in business
success. There should be effective dialog between managers and employees for making
suggestions and providing mutual support. Your staff needs to feel that they're valued team
members before they can feel content in their roles.

Employee handbooks and internal policies should be well-documented and enforced objectively
and consistently. Performance reviews, disciplinary actions, hiring procedures, and other
standard practices need to be transparent and fair, Otherwise, allegations of discrimination,
harassment, or preferential treatment can surface to damage reputations and undermine the
positive culture you' re trying to build.

You should also provide transparency by sharing business information with employees, such as
organizational changes, technology upgrades, or important new clients. This helps your workers
feel a stronger connection to the company overall, and take an interest in corporate strategy and
outcomes. They are able to develop an appreciation of overall operations beyond their own
needs and activities.

(5) Management
It boosts employee performance and dedication when they know that they have the backing of
their managers. Managers who can communicate that they respect their teams as individuals as
well as employees command greater loyalty. Your workforce needs to feel that their employer is
committed to their well-being in return for their hard work and perseverance.
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 Your concern for your employee's futures can be expressed through practices like advancement
opportunities and no-layoff policies. Management should also relate to employees invite their
ideas and feedback, and step in to help out with difficult situations. Employees experience
greater trust, gratitude, and productivity toward a company that cares about their future.

A well-defined company culture provides more appeal in all aspects of business. It helps you
establish confidence with customers and partners as well as draw and retain talented employees. A
culture that practices strong principles, provides a good working environment, and cares about its
employees will be able to count on greater performance and loyalty.

The Notion of ORGANIZATIONAL CULTURE

Organizational Culture is a system of shared assumptions, values, and beliefs, which governs
how people behave in organizations. Organizational culture includes an organization's expectations,
experiences, philosophy, and values that hold it together, and is expressed in its self-image, inner
workings, interactions with the outside world, and future expectations. It is based on shared attitudes,
beliefs, customs, and written and unwritten rules that have been developed over time and are
considered valid. These shared values have a strong influence on the people in the organization and
dictate how they dress, act, and perform their jobs.
Every organization develops and maintains a unique culture, which provides guidelines and
boundaries for the behavior of the members of the organization.

Organizational culture/corporate culture includes:

• The ways the organization conducts its business, treats its employees, customers, and the
wider community,
• The extent to which freedom is allowed in decision making, developing new ideas, and
personal expression,
• How power and information flow through its hierarchy, and
• How committed employees are towards collective objectives

Characteristics of Organizational Culture

As individuals come into contact with organizations, they come into contact with dress norms,
stories people tell about what goes on, the organization’s formal rules ad procedures, its formal codes
of behavior, rituals and tasks, pay systems, jargon and jokes only understood by insiders.
Organizational culture is composed of seven characteristics that range in priority from high to low.

1. Innovation (Risk Orientation)

2. Attention to Detail (Precision Orientation)
3. Emphasis on Outcome (Achievement Orientation)
4. Emphasis on People (Fairness Orientation)
5. Teamwork (Collaboration Orientation)
6. Aggressiveness (Competitive Orientation)
7. Stability (Rule Orientation)

Innovation (Risk Orientation)

Companies with cultures that place a high value on innovation encourage their employees to take
risks and innovate in the performance of their jobs. Companies with cultures that place a low value on

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innovation expect their employees to do their jobs the same way that they have been trained to do
them, without looking for ways to improve their performance.

Attention to Detail (Precision Orientat1on)

This characteristic of organizational culture dictates the degree to which employees are expected
to be accurate in their work. A culture that places a high value on attention to detail expects its
employees to perform their work with precision. A culture that places a low value on this characteristic
does not.

Emphasis on Outcome (Achievement Orientation)

Companies that focus on results, but not on how the results are achieved, place a high emphasis
on this value of organizational culture. A company that instructs its sales force to do whatever it takes
to get sales orders has a culture that places a high value on the emphasis on outcome characteristics.

Emphasis on People (Fairness Orientation)

Companies that place a high value on this characteristic of organizational culture place a great
deal of importance on how their decisions will affect the people in their organizations. For these
companies, it is important to treat their employees with respect and dignity.

Teamwork (Collaboration Orientation)

Companies that organize work activities around teams instead of individuals place a high value
on this characteristic of the organizational culture. People who work for these types of companies tend
to have positive relationship with their coworkers and managers.

Aggressiveness (Competitive Orientation)

This characteristic of organizational culture dictates whether group members are expected to be
assertive or easygoing when dealing with companies they compete within the marketplace. Companies
with an aggressive culture place a high value on competitiveness and outperforming the competition at
all costs

Stability (Rule Orientation)

A company whose culture places a high value on stability is rule-oriented, predictable, and
bureaucratic in nature. These types of companies typically provide consistent and predictable levels of
output and operate best in non-changing market conditions.

Every organization has a distinct value for each of these characteristics. Members of the
organization makes judgment on the value their organization places on these characteristics and then
adjust their behavior to match this perceived set of values.

ROLES OF ORGANIZATIONAL CULTURE

Culture plays an important role in organizations. Some organizations which developed a strong
corporate culture, they increased their goodwill and got a good position in the market.

The various roles of organizational culture are:

• Culture unites (brings together) employees by providing a sense of identity with the organization.
• An informal control mechanism.
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 • Facilitation of open communication.
• Culture enables organizations differentiate themselves from one another.
• Culture often generates commitment, superseding personal interests.
• Culture sets organization norms, rules, and standards. Thereby, culture enables employees to
function in an organization, by teaching them how to behave.
• A shared understanding.
• Culture becomes especially important in a program/project-based organization. In such an
organization, the hierarchy is flat and decision-making is moved to the project/program purpose
units and departments. In this context, culture provides the guiding light towards the
achievement of goals and objectives.
• Enhanced mutual trust and cooperation.
• Fewer disagreements and more efficient decision-making processes.
• A strong sense of identification.
• Assisting employees in making sense of their behaviors by providing justification for behaviors.

THE NEED FOR ETHICAL ORGANIZATIONAL CULTURE

Organizational ethics refers to the responsibility of an organization to conduct its business in an

honest, respectable, and appropriate manner.

Shiva (1988) States that: "Modern Science is quintessentially reductionist. Its reductionist nature
undergirds an economic structure based on exploitation, profit maximization and capital accumulation."

It should constantly seek a possible alternative by which human beings can improve and grow,
which in the ultimate instance is what characterizes the ethical organization (Polo, 1991).

We glean the transcendent nature such goal from the theory of human action in organizations
whereby Perez Lopez (1991) explain that the human person in business organization is capable of
having transcendent motives.

Rosanas and Velilla (2003) explain this quite well by saying that the ethical (read “morality good")
manager is, thus, one who provides the motivational conditions for the organizational members to
achieve their full potential which ultimately means being that free and open system who is capable of
self-gift, a radical love which is a selfless interest for the good of the other.

(Ethics): What is not human does not deserve respect. Ethics of care and concern for specific
aspects of the common good seem crucial in organization both large and small, as do personal values,
character, and leadership of the owner-manager of the organization.

The most important influence on ethical behavior in the workplace is overall company culture,
which determines whether employees are valued or belittled and whether stakeholders are treated with
trust or suspicion.

Ethics does not consist only in some rules invented or formulated out of more or less
conventional or relative motives that vary from culture to culture. Ethics depends on criteria that are not
universal; rather, there are as many ethics as there are ways or formalizations of human life. In a
situation as pluralistic as the present one, it is also usually said that ethics is a private matter.

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Organizational culture should be at the service of the human person, not the other way around: we
respect cultural manifestation but only if they turn respect human nature, essence, growth and human
flourishing (Polo, 1997), the summit of which is attained through the virtues

https://study.com/academy/lesson/ethical-culture-and-positive-culture-in-organizations.html

ACTIVITY 3
Write a narrative on what you feel with activity 1 and 2. What runs through
your mind upon identifying these characteristics? What is the impact of this
activity to you?

CREATING CORPORATE CODES OF ETHICS

A culture of character is the type of organizational culture in which positive moral values are
ingrained throughout the organization.

Pastin (1986) describes organizations exhibiting what we call a culture of character as those that
possess the following four stylistic markers:

1. They are at ease interacting with diverse internal and external stakeholder groups.
2. They are obsessed with fairness.
3. Responsibility is individual rather than collective, with individuals assuming personal
responsibility for actions of the organization.
4. They see their activities in terms of purpose.

Sims (2005) added:

1. There exists a clear version and picture of integrity throughout the organization.
2. The visions are owned and embodied by top management, over time.
3. The reward system is aligned with the vision of integrity.
4. Policies and practices of the organization are aligned with the vision, there are no mixed
messages.
5. It understood that every significant leadership decision has ethical value dimensions.
6. Everyone is expected to work through conflicting stakeholder value perspectives.

CREATING CORPORATION CODES OF ETHICS

Sauser and Sims (2013) give the following suggestions for creating codes of ethics in business
organizations:

1. Adopt a code of ethics

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 2. Provide ethics training - ethical conduct, both in and out of the office, customer privacy and data
protection, etc.
3. Hire and promote ethical people - An ethical person is someone who is consistent with their
beliefs by their actions and they have empathy for others.
4. Correct unethical behavior - Engaging in price fixing to force smaller competitors out of business,
Not paying an employee for all of the hours worked.
5. Take a proactive strategy -Proactive Strategies are interventions which are used on an ongoing
basis in an attempt to reduce the likelihood of occurrence of the challenging behavior
6. Conduct a social audit - A social audit serves as a way for a business to see if the actions being
taken are being positively or negatively received and relates that information to the company's
overall public image
7. Protect Whistle-blowers - a person who informs on a person or organization engaged in an illicit
activity.
8. Empower the guardians of integrity
9. Assure commitment from the top
10. Communicate the standards of conduct widely throughout the organization and the industry
11. Designate an ethics officer with clear responsibility for enforcing ethical standards
12. Establish a process for reporting violations of ethical standards and actively investigate all
reported violations
13. Assure due diligence by the organization's board of directors
14. Above all, lead by example

Additional texts to read and video to watch

What are the 4 Types of Organizational Culture?

http://digitalcommons.www.na-businesspress.com/JLAE/SauserWI_Web10_1_.pdf

code of ethics for teachers

http://teachercodes.iiep.unesco.org/teachercodes/codes/Asia/Philippines.pdf

How important is ethical behavior?

https://smallbusiness.chron.com/important-influence-ethical-behavior-workplace-41952.html

How to create code of ethics/code of conduct?

https://www.youtube.com/watch?v=FY8t44-Qep0

Resources:
Racelis, A., Business Ethics and Social Responsibility.2017. Rex Bookstore.Philippines
http://digitalcommons.www.na-businesspress.com/JLAE/SauserWI_Web10_1_.pdf

ACTIVITY 4
Write down your own personal code of ethics.
ACTIVITY 5 Performance Task
Take a video of you sharing your Activities 1-4 and send it as attachment on
our classroom.
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