Corporate Culture: One way to curb unethical behavior

Corporate culture A blend of ideas, customs, traditional practices, organizational values and shared meanings that help define normal behavior for everyone who works in a company

 “The accepted way of thinking, feeling, and acting in an organization”  “Shared beliefs about what is important and how things are done”  “Social glue that binds members of the organization together through shared values, symbolic devices, and shared ideals”

Artifacts: What can you see & hear?  Symbols  Slogans/mottos/credos  Rituals  Stories  Dress code  Layout of space  Technology used  Observable

Espoused values: How the organization wants to operate  Rules/regulations  Policies  Code of conduct  Strategies  Goals  Philosophies  Ethical climate: The unspoken understanding among employees of what is and is not acceptable behavior.  Somewhat observable

Assumptions and beliefs  Perceptions  Thoughts  Feelings  Not observable

Functions of Organizational Culture  Behaviorial control  Establishes Organizational Identity  Fosters Commitment  Promotes Stability Expectations (norms and rules) and what to anticipate and how to behave

Types of culture  Strong  Weak

 Judgment  Communication  Impact  Curiosity  Innovation  Courage  Passion  Honesty  Selflessness

What is the culture here?

Foundation of a strong culture?  Ethical leaders!  “In thought, word and deed, a company’s leaders must clearly and unambiguously both advocate and model ethical behavior.” -CEO, Merck  What are the traits of an ethical leader?  Difference between good and ethical

We can’t assume everyone will be ethical all of the the time so… sometimes you have to regulate.

Sarbanes-Oxley Act 2002  A Public Company Accounting Oversight Board is established.  The firms are not permitted to offer loans to its executive officers or board of directors.  SEC rules will create guidelines for internal controls and financial reporting procedures.  ERISA penalties are increased from $5,000 to $100,000 and one year in prison to $100,000 to $500,000 and up to 10 years in prison.

Sarbanes-Oxley Act 2002  The firm’s audit committee is entrusted with auditor oversight and with all independent directors on the committee  Certain nonaudit services by auditors to clients are banned, nonaudit services must be preapproved by the audit committee, the lead auditor must be rotated every five years, and auditors report to the audit committee.  The CEO and CFO must sign off on financial statements as accurate and fair and must repay bonuses if a restatement of financials is undertaken.

U.S Corporate Sentencing Guidelines: Directives  Establish standards and procedures to reduce criminal conduct  Assign high-level officer(s) responsibility for compliance  Not assign discretionary authority to “risky” individuals  Enforce standards and procedures through disciplinary mechanisms  Following direction of offense, respond appropriately and prevent reoccurrence

U.S Corporate Sentencing Guidelines  Effectively communicate standards and procedures through training  Take reasonable steps to ensure compliance- monitor and audit systems, maintain and publicize reporting systems

Ethics Codes/Policies in Organizations: How to  The code is about corporate culture -What lines can’t be crossed?  Get input -From ALL levels  Don’t be too specific or too vague  Watch out for pitfalls -Nepotism, harassment, discrimination  Ask experts (HR, ethicist, lawyer)  Put someone in charge -Who applies and updates?

In order to comply…  Codes of ethics exist in each of your chosen fields: -Accounting (AICPA, IFAC, Code of Ethics for Professional Accountants) -Finance (FPA, NAPFA) -Marketing (AMA, BMA) -Information Technology (Association of IT Professionals)

Creating a culture of ethical leaders  Ethics committees  Ethics officers/ombudspersons  Hot lines  Ethics audits  Corporate ethics awards

Ethics Training  Ethics training videos