CULTURE

The Role of Corporate Culture in Ethical Decision Making

Corporate culture is a set of values, beliefs, goals, norms, and ways of solving problems shared by members (employees) of an organization. Also defined as the way we do things around here

The shared beliefs top managers in a company have about how they should manage themselves and other employees and how they should conduct business Culture gives members of an organization meaning and provides them with rules for behaving within the organization.

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Corporate Culture

A companys history and unwritten rules are a part of its culture. Culture can be influenced by the founders values. May be explicit statements of values, beliefs, and customs Coming from upper management in the form of memos, codes, handbooks, manuals, forms and ceremonies

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May be expressed informally through direct and indirect comments that convey managements wishes Dress codes, promotions, legends, extracurricular activities

Culture that generates high ethical commitment in employees

1. A command-andcontrol approach to promote compliance

Rules, punishment, training, and

reporting.

2. Values and Integrity Approach

This can be thought of as a market-based approach because employees are asked to buy into the values of the organization

Rests on employees governing their own behavior by voluntarily choosing compliance behavior because they believe it to be the best way to act.

The goal is to have the employees engage with and adopt the values of the organization as their own. When this engagement occurs, employees are more like to comply with rules even when they are not monitored.

Hence, in this approach, enforcement of standards does not belong solely to ethics officers and their designees, but to all employees

Which approach is more effective?

Study supports that a value based approach is more effective than a compliance based approach. Because as compared to compliance-based programs, values-based programs had:

fewer reports of unethical conduct, higher levels of ethical awareness, more employees seeking advice about ethical issues, and a higher likelihood of employees reporting violations

Organizations should promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.

commitment to compliance, is the notion which goes beyond behavior. It signals the importance of engaging employee values to generate a commitment to comply with the law.
If a company does not establish a culture that encourages ethical conduct and a commitment to compliance, all the positive work done to establish formal ethics and conduct programs would be at risk.

How to build a culture that generates commitment to compliance?

Outcome fairness- It is determined by what people think they deserve Procedural fairness- Procedural fairness applies to the processes that create outcomes. there are two key dimensions of employee procedural fairness judgment

Procedural Fairness
1. Fairness of decision making
Includes

whether employees have opportunities for input before decisions are made? Second, are decisions made following understandable and transparent rules? Third, are decision-making bodies acting neutrally, basing their decisions upon objective information and appropriate criteria, rather than acting out of personal prejudices and biases? Fourth, are the rules applied consistently across people and over time?

2. Fairness of interpersonal treatment

Involves the manner in which people are treated during the decision-making process. First, are peoples rights as employees respected? For example, do managers follow the rules specified in organizational manuals or employment contracts? Second, is their right as a person to be treated politely and with dignity acknowledged, and does such treatment occur? Third, are the decision makers concerned about employee needs and concerns when they make decisions? Finally, do the decision makers account for their actions by giving honest explanations about what they have decided and why they made their decisions?