Organizational Factors: The Role of Culture and Relationships

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Ethical Decision Making for Business 8e
Fraedrich/ Ferrell/ Ferrell
C H A P T E R 7
CHAPTER 7

• Organizational Factors The Role of Culture and
  Relationships

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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

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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?

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Ethical Corporate Culture

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

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Corporate Culture

• May be formal statements of values, beliefs, and
  customs
• May be informal through direct or indirect
  comments conveying managements wishes
• Two dimensions
• Concern for people
• Concern for performance

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Four Organizational Culture Types

• Apathetic
• Caring
• Exacting
• Integrative
• A cultural audit is an assessment
• of the organizations values

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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

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Differential Association

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

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Whistle Blowing

• Exposing an employers wrongdoing to outsiders
  (external to the company)
• The SarbanesOxley Act and the FSGO has
  institutionalized whistle-blowing to encourage
  discovery of misconduct

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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

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Motivation

• A force within the individual that focuses
  behavior toward achieving a goal
• An individuals hierarchy of needs may influence
  motivation and ethical behavior
• Needs or goals may change over time

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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

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Groups in Corporate Structure and Culture

• Formal groups
• Informal groups
• Group norms

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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