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 CHAPTER 7

Chapter Objectives To understand the concept of corporate culture To examine the influence of corporate culture on business ethics To determine how leadership, power, and motivation relate to ethical decision making in organizations To assess organizational structure and its relationship to business ethics To explore how the work group influences ethical decisions To discuss the relationship between individual and group ethical decision making

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?

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

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

Four Organizational Culture Types Apathetic Caring Exacting Integrative A cultural audit is an assessment of the organization’s values

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

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

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

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

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

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

Groups in Corporate Structure and Culture Formal groups Informal groups Group norms

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