Chapter 5:

Influence of Culture on Individuals

 Ethical culture: Ethical Awareness, Judgment, and Action.

 Individual differences: Ethical judgment and action.

CULTURE: learned beliefs, traditions, and guides for behavior shared among members

Organizational Culture

 Shared Assumptions, Values, and Beliefs in a company.

 Strong cultures have widely shared values, while weak cultures are more influenced by subgroups.

Ethical Culture: A Multisystem Approach

 Formal Systems: Include executive leadership, selection systems, policies/codes, orientation/training,

performance management, authority structure, and decision processes.
 Informal Systems: Include role models/heroes, norms, rituals, myths/stories, and language.

Alignment and Misalignment

 Alignment: employees on the same ethical direction.

 Misalignment: When mixed messages about expectations.

Situational Ethics

 Contextualism: Ethical decisions depend on the context rather than universal rules.
 Emphasizes the need for flexible, situation-specific ethical guidelines.

Working principles: pragmatism, relativism, positivism, personalism.

Leadership and Ethical Culture

 Executive Leaders Create Culture (maintain or change)

 Types of Ethical Leadership: Includes ethical leadership, unethical leadership, hypocritical
leadership, and ethically neutral leadership.
 2 pillars for Ethical Leadership: moral person (values, behaviors, decision making) and a moral
manager (its role, communication and rewards/discipline)

Other Formal Cultural Systems

  Selection Systems, Values and Mission Statements, Policies and Codes, orientation and Training
Programs, Performance Management Systems, organizational Authority Structure, Decision-making
Processes.

Informal Cultural Systems: Role Models and Heroes, Norms, Rituals, Myths and Stories, Language.

Ethical Climates: Fairness, Benevolence, Self-Interest, Principles.

Ethical Culture Change: From Ethical to Unethical and Unethical to Ethical

MODERNISM:

 was a rebellious state of mind that questioned all artistic, scientific, social, and moral conventions.
 They viewed the world and human existence as meaningless.
 Rejected the belief that morality and organized religion provided the means for social evolution and/or
the betterment of man.
 They questioned all systems (academy, church, etc)
 Explored the uncivilized nature of man.
 Embraced the natural primal roots of primitive man.
 Pursuit of personal and artistic freedom.

PARADIGMS:

1. Newton: Relativity is Space, Time and Light (he said this was absolute, objective) Moderns say it was
subjective reality

◦ Alfred Whitehead: “Reality is not static but in a state of flux, always in the process of becoming. Each
object is relevant to its surroundings in that it is in the process of becoming another object”

2. Albert Einstein: The Special Theory of Relativity: Space and time are relative; only the speed of light
is constant. There is no such thing as a favored point of view.

Postmodernism aesthetic, literary, political or social philosophy. Means 'after the modernist movement'. a
reaction to modernism.

SUPPORTED BY: Søren Kierkegaard, Friedrich Nietzsche

CRITICS:

 Biologist Richard Dawkins “generally are intellectual charlatans who deliberately obscure weak or
nonsensical ideas”
 The linguist Noam Chomsky “is meaningless because it adds nothing to analytical or empirical
knowledge.”
Chapter 6: Structuring Ethics

Structuring Ethics Management

 Corporate Ethics Office

 Ethics Officers: Can be insiders or outsiders; responsible for managing the ethics program.
 Ethics Infrastructure: systems, processes, and norms
 Corporate Ethics Committee

U.S. Sentencing Guidelines

 Established in 1991 and appluy to all companies

 Penalties: Can include fines and even the "death penalty" (liquidation of the company).
 Not apply to Equal Employment Opportunity Commission (EEOC) violations (discrimination, sexual
harassment because they have its own penalties)
 Companies must report wrong behaviors, cooperate in investigations have compliance program.

Communicating Ethics

 Have principles.
 Evaluating Ethics Communication.
 Communication Channels
 Ethics Training Programs
 Have a reporting system

AUDIENCES AT COMPANIES:

 Good soldier: Know rules, good asset

 Loose canons: good assets don’t know rules needs training
 Grenades: Not good assets, could know the rules, needs senior example and discipline.

Compliance vs. Values-Based Approaches

 Compliance-Based: Rooted in laws and regulations, often reactive with limited senior management
involvement and clear penalties. Require signature.
o Employees think company is protecting itself, they could be cynical and less committed.
 Values-Based: Driven by organizational culture and values, proactive with senior management
commitment. Aspirational and proactive.
o Employees are committed, willing to report, and support decisions. HERE THEY COULD ACT
MORE ETHICALLY.

Ethical Behavior and Sanctions

 Model of Ethical Behavior:

Cultural, organizational, environmental influence >> individual influence >> ethical behavior

 Principles in organizations: Honesty, integrity, Loyalty, Fairness, concern for others, trustworthiness.
 Unethical Behaviors: Include corruption, undue influence, arbitrariness, sexual harassment,
favoritism, and partiality.
 Sanctions:
o Reprimand: A formal written notice
o Letter of Censure: Prohibition of office for respondent and superior.
Influencing and Encouraging Ethical Behavior

 Influencing Employees with actions that develop trust, consistency, truthfulness, integrity, and
respect.
 Encourage ethical: Communicating code of ethics, Managers as role model, establish disciplinary
actions and rewards for good behavior.

Management should:

 Do Ethics Audits
 Communicate and show the model behavior with education
 Protect employees

Compensation

 Criticism of excessive compensation and the staunch defense of corporate interests.

 Excessive executive compensation practices also speak to significant ethical issues of corporate
governance and finance.
 Compensation have a utilitarian function when they incentivize executives to produce greater overall
results, and they are a matter of ethical principle by compensating individuals based on what they have
earned and deserve.

IN PRACTICE:

 less correlation between pay and performance

 executives seem to reap large rewards regardless of business success.
 excessive compensation may evidence a failure of corporate boards

Chapter 8 Overview: Employee Engagement

 Employee Engagement: Defined as discretionary effort that employees bring to their work.

TYPES:

 Engaged: Passionate, enthusiastic, connected to the company, drive innovation, go the extra mile.
 Not Engaged: Checked out, sleepwalking, execute but not energy or passion.
 Actively Disengaged: Negative drag on culture, may sabotage company initiatives, no loyalty.

Cost of Disengaged Employees

 In the United States:

o 16% actively disengaged, costing $13,000 per year per employee in lost productivity.
o Total lost productivity estimated at nearly $300 billion annually.

Benefits of Engaged Employees

o 50% lower turnover and absenteeism.

o 56% higher customer loyalty.
o 27% higher profits, generating $3,800 more in profits per employee.
o 46% fewer accidents.
 o $27,000 more in sales and $18,600 more in market value per employee.

Drivers of Engagement

 Line of Sight: Understanding company's strategic direction and how individual efforts contribute.
(ethical: Evaluation of credibility)
 Involvement: Active participation and having ideas heard (ethical:2 ways communication)
 Information Sharing: Access to necessary information, fostering an open culture. (ethical:
transparency)
 Rewards & Recognition: Clear goals and values, ensuring ethical behavior is rewarded.

Managing the Basics: Hiring, work assignments, performance evaluation, discipline, terminations.

Ethical Leadership: is Influencing activities towards goal achievement in a socially responsible way and
pushing ethical goals.

Leadership is a process that involves influence, occurs in groups, and needs common goals. Is important
because:

 The interpersonal trust’ model developed by Schindler and Thomas,

 The ‘social power’ model developed by French and Raven

10 activities of a Moral leader (Daft): Develop, articulate and uphold, Focus On, Set, Be, drive our, Establish
and communicate, develop, reward, treat, and Do.

Northouse’s five principles of ethical leadership: Respect others, serve, are, are honest and build
community

Managing a Diverse Workforce: Diversity, Harassment, Family and Personal Issues and Ethical Problems.

DIVERSITY: Give better performance, everybody seem a member of the organization.

 Equal employment opportunity: treat people fairly and equally.

 Diversity management: More emphasis on differences among people at work.

 Treatment: Identical Treatment: Christmas for all people. VS Equitable treatment: when you celebrate.

 The glass ceiling describes a barrier that keeps many females from advancing to top management
positions in many organizations.

Disability: Aesthetic (perceived negatively), Not physical.

6 Issues of how diversity is a source of competitive advantage: Cost, resource acquisition, marketing,
creativity, problem solving, and system flexibility.

Individual strategies: Understanding diversity, have empathy, be tolerant and have 2 way communication.

Multicultural Organization: Pluralism, full structural integration, absence of prejudice, and low levels of
intergroup conflict.

 Manager's Role: Establish clear standards, communicate expectations, and act as role models.

 RULE 1: HONESTY
 Standards go both ways

Deferred prosecution agreements (DPAs) were introduced under Canadian law in September 2018.
voluntary agreements that are negotiated between an accused and the Crown to resolve corporate wrongdoing

Chapter 9 Overview: Corporate Social Responsibility (CSR)

Corporate Social Responsibility (CSR): Goes beyond economic and legal obligations to act ethically and
contribute positively to society.

Is an evolving concept and disagreement between business, government, NGOs

 1950s-1970s: focused on social elements.

 1970s-1980s: Development of models and conceptual frameworks.
 1980s onwards: focus on the financial impacts and competitive advantages of CSR.

Definitions of CSR

 World Business Council for Sustainable Development (1999): Companies commitment to ethical
behavior and economic development while improving quality of life for employees, families, and the
community.
 World Bank (2008): Contribution to sustainable economic development.
 Kotler & Lee (2005): Improving community well-being through discretionary business practices and
contributions.
 Carroll (1979): Encompassing economic, legal, ethical, and discretionary expectations from society.
 The Commission of the European Communities (2001): “voluntarily contribute to a better society
and a cleaner environment. Responsibility towards stakeholders.”

Models of CSR

 Carroll's Pyramid (1979): Four areas of corporate social performance: economic, legal, ethical, and
philanthropic.
 Dahlsrud’s Dimensions (2008): Environmental, social, economic, stakeholder, and voluntariness
dimensions.

CSR in Large Corporations vs. Small Businesses

 Large Corporations: Standardized and formalized CSR policies, often developed at board level.
 Small Businesses: More informal and organic approaches to CSR.
 Challenges: One-size-fits-all approaches do not work due to differences in structure and resources.

Why Corporate Social Responsibility?

 Pragmatic: Maintain legitimacy, protect reputation, and ensure viability.

 Ethical: Responsibility to behave ethically and contribute to the greater good.
 Strategic: Creating shared value and differentiating from competitors; reputation and awareness.

CSR impacts Stakeholders: Owners, organizations, employees, suppliers, government, financial institutions,
competitors, customers, community, interest groups, and media.

Types of Corporate Social Responsibility

 Economic Responsibilities: Generating profits.

 Legal Responsibilities: Complying with laws and regulations.
 Ethical Responsibilities: Doing what is right beyond legal obligations.
 Philanthropic Responsibilities: Contributing to the community and improving quality of life.

Triple Bottom Line: Economic, social, and environmental sustainability.

CASE: MERK