1. Culture and Ethics Crispin Farbrother8

2. Objectives
Students are to understand and evaluate ethical matters within business and the business environment.
Students are to apply basic ethical philosophies to strategic management.
Students are to be able to evaluate the role of culture in an organisation’s ethical purpose or stance.
Students are to be able to apply corporate governance to organisations.

3. So - whom does the organisation serve?
Corporate governance
Whom should the organisation serve?
How should purposes be determined?
Business ethics
Which purposes should be prioritised?
Why?
Organisational purposes
Mission
Objectives
Cultural context
Which purposes are prioritised?
Why?
Stakeholders
Whom does the organisation serve?
We are looking at stakeholders this week. The ethics element will be covered next week.
So - whom does the organisation serve?
Exhibit 5.1 Influences on organisational purposes

4. Reports received:
Beneficiaries
Limited reports
Trustees
Limited investment performance reports
Investment managers
Accounts
Analysts’ reports
Company briefings
Board
Budgets/qualitative reporting
Executive directors
Budgets/qualitative reporting
Senior executives
Budgets/other operating reports
Managers
Exhibit 5.2 The chain of corporate governance: typical reporting structure
Source: David Pitt-Watson, Braxton Associates. Reproduced with permission

5. ETHICAL STANCE DRIVERS OF STRATEGY
Exhibit 5.13 The role of mission statements

6. Some common conflicts of expectations
Growth vs profitability
Short term vs investment
Control vs professional managers
Ownership vs funding
Ownership vs accountability
Efficiency vs jobs
Mass appeal vs quality
Exhibit 5.3

7. ANGLO-SAXON MODEL (USA AND UK) Strengths
Dynamic market orientation
Fluid capital
Internationalisation possible
EUROPEAN MODEL (GERMANY)
Long-term industrial strategy
Very stable capital
Strong governance procedures
ASIAN MODEL (JAPAN)
Stable capital
Overseas investments
Weaknesses
Volatile instability
Short-termism
Inadequate governance structures
Internationalisation difficult
Vulnerable to global market for companies
Growth of merger activity
Growth of institutional investor activism
Growth of financial speculation
Secretive, sometimes corrupt, procedures
Exhibit 5.4 A critique of some different corporate governance systems
Source: T. Clarke and E. Monkhouse (eds), Rethinking the Company, Financial Times/Pitman, Reproduced with permission

8. THE ROLE OF THE BOARD (1) Anglo-Saxon (UK and US) European (Germany)
single tier board
executives and non-executives
supervises managers
sub-committees
European (Germany)
two tier board
upper tier supervises lower tier
lower tier managers
co-determination (shareholders/employees) 3

9. THE ROLE OF THE BOARD (2) Asia (Japan) mainly executives
a tier in management hierarchy
cultural expectations of directors 4

10. Activity
Read illustration 5.1 page 206, Johnson & Scholes, Exploring Corporate Strategy 5th Edition. Hemel Hempstead: Prentice Hall. Utilising Exhibit 5.2 answer the two questions set.

11. Business ethics
Is it an oxymoron?

12. “The ethical stance is the extent to which an organisation will exceed its minimum obligation to stakeholders.”
Johnson & Scholes, 1999,p225

13. Moral Philosophies Ideas of right and wrong
A system of values by which people live
In particular refers to principles or rules that one uses to decide right from wrong
"They present guidelines for determining how conflicts in human interests are to be settled and for optimising mutual benefit of people living together in groups"
(Ferrell & Freadrich, 1997)
There is no one moral philosophy accepted by everyone.
There are many philosophies and each one is complex. We will only look at the basic concepts.

14. Moral Philosophies Teleology (measure by consequences) egoism -
Two teleological philosophies are:
egoism -
maximise an individual's self interest.
Utilitarianism -
greatest good for the greatest number of people. Greatest total utility.

15. Deontology
"Focuses on the preservation of individual rights and on the intentions associated with a particular behaviour rather than on its consequences."
Act in a way that you feel comfortable with everyone in the world seeing and be it that your rational is suitable to become a universal principle.
Belief in the means rather than the ends.
Split into
1) rule deontologists and 2)act deontologists.
1) The golden rule
2) Equity, fairness and impartiality

16. Relativist
"Evaluates ethicalness subjectively on the basis of individual and group experiences."
(Ferrell)
Group consensus (however circumstances change)
Group could be
employees,
peers,
suppliers,
customers,
community.

17. Short-term shareholder interests 1 Longer-term shareholder interests 2
Multiple
stakeholder
obligations 3
Shaper of
society 4
Exhibit 5.7 Four possible ethical stances

18. Should organisations be responsible for ...
INTERNAL ASPECTS
Employee welfare
... providing medical care, assistance with morgages, extended sickness leave, assistance for dependants, etc.?
Working conditions
... enhancing working surroundings, social and sporting clubs, above minimum safety standards, etc.?
Job design
... designing jobs to the increased satisfaction of workers rather than for economic efficiency?
Exhibit 5.8a Some questions of corporate social responsibility

19. Should organisations be responsible for ...
EXTERNAL ASPECTS
Green issues
... reducing pollution below legal standards if competitors are not doing so?
... energy conservation?
Products
... danger arising from the careless use of product by consumers?
Markets and marketing
... deciding not to sell in some markets?
... advertising standards?
Suppliers
... ‘fair’ terms of trade?
... blacklisting suppliers?
Employment
... positive discrimination in favour of minorities?
... maintaining jobs?
Community activity
... sponsoring local events and supporting local good works?
Exhibit 5.8b Some questions of corporate social responsibility

20. Seminar Preparation
Be prepared to answer the receding questions.
Ensure that you can support your views.
Can you equate this with the moral philosophies?

21. Preparation & Reading
Much is said about culture in the strategy books.
You are to read around the areas covered.
Here are a few general pointers and questions that are raised when discussing culture.

22. Exhibit 5.10 Culture in three layers
Values
Beliefs
Paradigm
Taken-for-granted
assumptions
Exhibit 5.10 Culture in three layers
Source: Adapted from E, Schein, Organisation Culture and Leadership, Jossey-Bass, 1985

23. What core beliefs do stories reflect?
How pervasive are these beliefs (through levels)?
Do stories relate to:
strengths or weaknesses?
successes or failures?
conformity or mavericks?
Who are the heroes and villains?
What norms do the mavericks deviate from?
Exhibit 5.11a Analysing the cultural web: some useful questions 3

24. Which routines are emphasised? Which would look odd if changed?
Routines and rituals
Which routines are emphasised?
Which would look odd if changed?
What behaviour do routines encourage?
What are the key rituals?
What core beliefs do they reflect?
What do training programmes emphasise?
How easy are rituals/routines to change?
Exhibit 5.11b Analysing the cultural web: some useful questions 3

25. Organisational structure How mechanistic/organic are the structures?
How flat/hierarchical are the structures?
How formal/informal are the structures?
Do structures encourage collaboration or competition?
What type of power structures do they support?
Is the organisation centralised or decentralised?
The structure and its influence on ethics: some useful questions 3

26. What is most closely monitored/controlled?
Control systems
What is most closely monitored/controlled?
Is emphasis on reward or punishment?
Are controls related to history or current strategies?
Are there many/few controls? 3

27. What are the core beliefs of the leadership?
Power structures
What are the core beliefs of the leadership?
How strongly held are these beliefs (idealists or pragmatists)?
How is power distributed in the organisation?
Where are the main blockages to change? 3

28. What is the dominant culture (defender, prospector, analyser)?
Overall
What is the dominant culture (defender, prospector, analyser)?
How easy is this to change?
Exhibit 5.11g Analysing the cultural web: some useful questions 3

29. Exhibit 5.12 Characterising culture
Source: Adapted from R.E. Miles and C.C. Snow, Organisational Strategy, Structure and Process. McGraw-Hill, 1978

30. The End
But your beginning