1. Ethical Climate and Compliance
Organizational Ethics
Ethical Climate and Compliance

2. Organizational Ethics
Ethical Environment

3. Managing Ethics in Business Organizations, Trevino and Weaver (2003)
“Ethics and the Broader Organizational Context: Ethical Climate and Ethical Culture”

4. Basic Theory
“… general theory driving this research: that the ethical context of the organization is associated with employee attitudes and behaviors.”
THE POWER OF THE SITUATION

5. Concepts Ethical culture
“the way we do things here” –beliefs, values and practices
From organizational culture
Phenomenal (observable behaviors and artifacts) and ideational (shared meanings, symbols, values)
“…various ‘formal’ and ‘informal’ systems of behavioral control that are capable of promoting either ethical or unethical behavior.” (Trevino)
E.g. rules, reward systems, expectation to obey authority

6. More Concepts Ethical climate
“the prevailing perceptions of typical organizational practices and procedures that have ethical content.” (Victor and Cullen)
Normative expectation in the organization
3X3 table: philosophy (egoism, benevolence, principled) and locus (individual, local, cosmopolitan)
Reduced to five dimensions: caring, law and code, rules, instrumental, independence

7. Ethical Environment Compilation of ethical culture and ethical climate
Includes perceptions:
Whether unethical behavior disciplined and punished
Whether top management represent high standards
Whether code is only ‘window dressing’
Whether top managers show interest in ethics
Whether code is consistent with informal, practiced norms
Whether people of integrity are rewarded

8. Research Question
Do ethical climate, cultures, and environments make a difference in employee attitudes, in particular commitment to the organization?
Do ethical climate, cultures, and environments make a difference in employee behaviors, in particular unethical behaviors?

9. Impression management Job satisfaction Ethical environment (aggregate)
Variables Studied (Related to Unethical conduct and Organizational Commitment)
Impression management
Job satisfaction
Ethical environment (aggregate)
Code implementation
Employee-focused management
Community-focused management
Self-interest
Efficiency
Personal ethics
Law and professional codes
Rules and procedures

10. Some Results
Empirically ethical culture and climate can be distinguished
“… an organization whose leaders represent high ethical standards and who reward ethical conduct is also an organization that values its employees, its community, and obeying the law.”
SOCIAL CONTRACT AND SOCIAL LICENSE?

11. Split Sample
Code Organizations (where subjects knew there was a code) – culture factors were more important – overall ethical environment and obedience to authority
Noncode organizations (where the organization did not have a code or subject did not know of code)

12. More Results Related to Unethical Conduct
In Sum :
Overall best predictors of unethical conduct for culture variables: overall ethical environment and obedience to authority
Among climate variables self-interest was associated with unethical conduct
Items:
“…very concerned about what is best for themselves”
“…people protect their own interests above other considerations”
In noncode settings laws and professional standards associated with unethical conduct

13. Results Related to Organizational Commitment
Organizational commitment more positive when:
Reward systems support
Not unquestioning obedience to authority
Leaders pay attention to ethics and take it seriously
There is employee-focused and community-focused commitment
For noncode situations focus on self-interest negatively related to commitment

14. Management Implications (Ethical Behavior)
“…have leaders who encourage and model ethical behavior and reward systems that reward ethical conduct and discipline unethical conduct, an ethics code that is consistent with norms, a focus away from strict obedience to authority and away from self interest at the expense of other considerations, and a focus on adherence to the law and professional standards when they apply.”

15. Management Implications (Employee Commitment)
For achieving organizational commitment: “They can focus on developing a culture that supports ethical conduct and discourages unethical conduct through leadership, reward systems, codes, and norms. They can focus on developing climates that emphasize the good of employee, customers, and the public rather than self-interest.”

16. Compliance and Values Orientations
Organizational Ethics
Compliance and Values Orientations

17. Compliance and Values Orientations of Ethics in Organizations
From Trevino, L.K. and Weaver, G.R. (2003). “The Uses and Limits of Formal Ethics Programs,” in Managing Ethics in Business Organizations, pp

19. Compliance vs. Values Orientations
Ethics Programs
Organizational control systems
Align behavior with organizational goals
Ensure predictability
Methods: coercive compliance or identification and commitment to collective organizational values (social contract)

20. Ethics Programs Compliance Values-Based Orientation
Phrased in legal terminology
Key staff (attorney)
Guidelines read like legal rules
Teaching rules and sanctions
Values-Based Orientation
Shared values and abstract principles such as respect and responsibility
Key staff (HR, management, operations)
Teaching focuses more on getting commitment, inspiring, and sharing ideals

21. Trevino and Weaver Approach
Ethics Program Outcomes (Measures of Success)
Increased ethical awareness
Commitment to the organization
Employee integrity
Willingness to communicate openly about issues
Willingness to report violations to management
Improved decision making
Willingness to seek advice
Reduced ethical conduct

22. Theoretical Frameworks
Values-Based
Role identity
Symbolic interaction
Social exchange
Between organization and employee
Organizational support for shared values
Compliance-Based
Contractual exchange

23. Values-Based Framework or Orientation
Role identity
Symbolic interactionist and social identity theories
Learn organizational identity through expectations and interactions
E.g. “learning community” at Daniels—identity to shared values and responsibilities. Salience or not of shared values that influence identity as Daniels student.

24. Values-Based Framework
Organizational support
Social exchange theory (Blau)
Leaders– subordinates; organizations– members
Reciprocal social benefits and expectations
Values-based program might emphasize activities to assist employees: e.g. ethical advice and counseling, ethical mentors or colleagues, systems to clarify and develop consensus on what is ethical conduct

25. Some Hypotheses More employees perceive values-based ethics programs:
H1: more awareness of ethical issues
H2: more willing to seek ethical advice in organization
H3: less unethical behavior in organization
H4: greater commitment toward organization
H5: greater belief of personal integrity
H6: acceptable to deliver “bad news”
H7: higher quality decision making in the organization

26. Compliance Framework or Orientation
Contractual exchange
Agreement to abide by ethical and organizational rules
Possible assumption of distrust– why else have rules and discipline (social contract and enforcer)
Monitoring and discipline important
Consistent punishment sends signal of justice
More calculation and conditioning than role identification with “values” of the organization and self

27. Some Hypotheses More employees perceive a compliance orientation:
H8: Less ethical behavior
H9: More willing to seek advice
H10: More aware of ethical issues
More employees perceive both compliance and values-based:
H11: More willing to report ethical behavior to management

28. Empirical Outcomes Support for hypothesized relationships
Sometimes two orientations work toward same end
Fortune 1000 firms (1999)– mean for compliance orientation (4.05) and values-based orientation (3.94)
“Usefulness analysis”– values-based orientation displays greater explanatory power
Integrated approach may be important– values-based orientation may frame the purpose and role of compliance
Consider:
Placement of office: e.g. HR or Legal
Director and staff: values-based MBA’s or lawyers

29. Other Influences on Ethics in Organizations
Perception that ethics programs are oriented to “protect top management”
Perception that company has “formal mechanism for raising concerns” and making ethics part of performance appraisal
Perception that organization “follows through” and not mere “window dressing”

30. More Factors
Leadership (“tone at the top”) one of the most important factors (leaders include supervisors)
Perception of “fair treatment” (strongest relation to employee commitment and delivering ‘bad news’)
Perception that ethics is talked about and integrated into decision making
Perception that ethical behavior is rewarded (again employee commitment and delivering ‘bad news’)

31. In General / Summary
Ethical culture factors most important influence factors:
Leadership
Fairness perceptions
Ethics discussed
Ethical behavior rewarded
What hurts or inhibits:
“expectation of unquestioning obedience to authority”