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ARC MGMT 374 Week 8 Presentation
- 1. Chapter 7:
Organizational Factors: The
Role of Ethical Culture and
Relationships
Part Three:
The Decision Making Process
© 2013 Cengage Learning. All Rights Reserved. 1
- 2. Ethical Corporate Culture
Corporate culture has many definitions
A set of values, norms, and artifacts, including ways
of solving problems shared by organizational
members
The shared beliefs top managers have about how
they should manage themselves and other
employees and how they should conduct their
business
Gives organizational members meaning and
sets the internal rules of behavior
All organizations have culture
© 2013 Cengage Learning. All Rights Reserved. 2
- 3. Sarbanes-Oxley 404
Culture is codified by the Sarbanes-Oxley
404 compliance section
Includes assessment of effectiveness of
controls by management and external auditors
Forces firms to adopt a set of values that make
up part of the culture
Compliance with 404 requires cultural change,
not only accounting changes
© 2013 Cengage Learning. All Rights Reserved. 3
- 4. Corporate Culture
May be formal through statements of values,
beliefs, and customs
Comes from upper management
Memos, codes, manuals, forms, ceremonies
May be informal through direct or indirect
comments conveying management’s wishes
Dress codes, promotions, extracurricular activities
The “tone at the top” is crucial in creating
ethical corporate culture
© 2013 Cengage Learning. All Rights Reserved. 4
- 5. Two Dimensions of Organizational
Culture
Concern for people
The organization’s efforts to care for its
employees’ well-being
Concern for performance
The organization’s efforts to focus on
output and employee productivity
© 2013 Cengage Learning. All Rights Reserved. 5
- 6. Perceived Tone and Culture of the CEO and
other Executives
© 2013 Cengage Learning. All Rights Reserved. 6
- 7. Four Organizational Culture Types
Apathetic: Minimal concern for people or
performance
Caring: High concern for people; minimal
concern for performance
Exacting: Minimal concern for people; high
concern for performance
Integrative: High concern for people and
performance
A cultural audit is an assessment of the organization’s
values
• Usually conducted by outside consultants; can be
handled internally
© 2013 Cengage Learning. All Rights Reserved. 7
- 8. Company Examples of Organizational Culture
Types
© 2013 Cengage Learning. All Rights Reserved. 8
- 9. Ethics and Corporate Culture
Ethical corporate culture is a significant factor
in ethical decision making
If a firm’s culture encourages/rewards/does
not monitor unethical behavior, employees
may act unethically
Management’s sense of an organizational
culture may differ from that guiding employees
© 2013 Cengage Learning. All Rights Reserved. 9
- 10. Compliance versus Values-Based
Culture
Compliance-based cultures use a legalistic
approach to ethics
Revolve around risk management, not ethics
Lack of long-term focus and integrity
Values-based cultures rely on mission
statements that define the firm and
stakeholder relations
Focus on values, not laws
Top-down integrity is critical
© 2013 Cengage Learning. All Rights Reserved. 10
- 11. Differential Association
The idea that people learn ethical/unethical
behavior while interacting with others
Studies support that differential association
supports ethical decision making
Superiors have a strong influence on
subordinates
Employees may go along with superiors’ moral
judgments to show loyalty
© 2013 Cengage Learning. All Rights Reserved. 11
- 12. Whistle-Blowing
Exposing an employer’s wrongdoing to
company outsiders
Some legal protections exist
The Sarbanes-Oxley Act, the FSGO, and the
Dodd-Frank Act have institutionalized whistle-
blowing protections to encourage discovery of
misconduct
Whistle-blowers fear retaliation
© 2013 Cengage Learning. All Rights Reserved. 12
- 13. Questions to Ask Before Engaging in External
Whistle-Blowing
© 2013 Cengage Learning. All Rights Reserved. 13
- 14. Forms of Retaliation Experienced as a Result
of Reported Misconduct
© 2013 Cengage Learning. All Rights Reserved. 14
- 15. To Whom Do Employees Report Misconduct?
© 2013 Cengage Learning. All Rights Reserved. 15
- 16. Leaders Can Influence Corporate
Culture
An effective leader is one who does well for
the stakeholders of the corporation
Effective leaders are good at getting followers to
common goals effectively and efficiently
Power refers to the influence that leaders and
managers have over the behavior and
decisions of subordinates
An individual has power when his/her presence
causes people to behave differently
Power and influence shape corporate culture
© 2013 Cengage Learning. All Rights Reserved. 16
- 17. Five Power Bases
Reward power: Offering something desirable
to influence behavior
Coercive power: Penalizing negative behavior
Legitimate power: The consensus that a
person has the right to exert influence over
others
Expert power: Derives from knowledge and
credibility with subordinates
Referent power: Exists when goals or
objectives are similar
© 2013 Cengage Learning. All Rights Reserved. 17
- 18. Motivation
A force within the individual that focuses
behavior toward achieving a goal
Job performance: A function of ability and
motivation
An individual’s hierarchy of needs may influence
motivation and ethical behavior
Relatedness needs: Satisfied by social and interpersonal
relationships
Growth needs: Satisfied by creative or productive
activities
Needs or goals may change over time
© 2013 Cengage Learning. All Rights Reserved. 18
- 19. Centralized Organizational
Structure
Decision making authority is concentrated
in the hands of top-level managers
Little authority delegated to lower levels
Best for organizations
That make high-risk decisions
Whose lower-level managers are not skilled in
decision-making
Where processes are routine
May have a harder time responding to ethical
issues
© 2013 Cengage Learning. All Rights Reserved. 19
- 20. Decentralized Organizational
Structure
Decision making authority is delegated as
far down the chain of command as possible
Flexible and quicker to recognize external
change
Can be slow to recognize organizational policy
changes
Units may diverge and develop different
value systems
• Ethical misconduct may result
© 2013 Cengage Learning. All Rights Reserved. 20
- 23. Groups in Corporate Structure and
Culture
Formal groups
Committees, work groups, and teams
Informal groups
The grapevine
Group norms
Standards of behavior that groups expect of
members
Define acceptable/unacceptable behavior within
the group
© 2013 Cengage Learning. All Rights Reserved. 23
- 25. Can People Control Their Own
Actions Within a Corporate Culture?
Ethical decisions are often made by
committees and formal and informal groups
Many decisions are beyond the influence of
individuals
Congruence between individual and
organizational ethics–increases potential for
making ethical decisions
Individuals need experience to understand how
to resolve ethical issues
© 2013 Cengage Learning. All Rights Reserved. 25