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Chapter 4: The Corporate Culture—Impact and Implications End of Chapter Questions, Projects, and Exercises 1. To help understand an organizational culture, think about some organization to which you belong. Does your company, school, or fraternity/sorority have its own culture? How would you describe it? How does it influence individual decision-making and action? Would you be a different person had you attended a different school or joined a different fraternity/sorority? How would you go about changing your organization’s culture? Direct students to the discussion about forming an organizational culture to begin answering this question. Or, ask students to reflect on cases that they may have read in a course on Organizational Behavior and challenge them to examine the ethical perspectives that may be implicit in those cases. Student organizations and clubs, as well as their own work experience can provide other examples of organizational culture and organizational change. Organizational culture is a powerful force that shapes the behavior and decisions of individuals within a group. Reflecting on my own experiences, I can say that both my workplace and university have distinct cultures that influence how people interact and make decisions. At my workplace, there is a strong emphasis on collaboration and innovation. This is reflected in the open office layout, regular team meetings, and encouragement to share ideas. The culture promotes a sense of belonging and inspires individuals to contribute their best work. It influences decision-making by encouraging employees to consider the impact of their actions on the team and the company as a whole. Personally, being part of this culture has helped me develop my collaborative skills and think more strategically about my work. Similarly, my university has a culture of academic excellence and diversity. The emphasis on critical thinking and research has shaped my approach to learning and problem-solving. The multicultural environment has broadened my perspective and taught me to appreciate different viewpoints. I believe that if I had attended a different university or joined a different fraternity/sorority, I would have had a different set of experiences and developed different skills. Changing an organization's culture is a complex process that requires commitment from leadership and buy-in from employees. It involves identifying the existing culture, understanding its strengths and weaknesses, and defining the desired culture. Strategies for change may include introducing new policies and practices, providing training and development opportunities, and fostering open communication. It also requires individuals to embrace the change and be willing to adapt their behavior to align with the new culture. 2. Consider how you evaluate whether a firm is “one of the good guys” or not. What are some of the factors you use to make this determination? Do you actually know the facts behind each of those elements, or has your judgment been shaped by the firm’s reputation? Identify one firm you believe to be decent or ethical and make a note of the bases for that conclusion. Next identify a second firm that you do not believe to be ethical or that you think has questionable values and write down the bases for that alternate conclusion. Now, using the Internet and other relevant sources, explore the firms’ cultures and decisions, checking the results of your research against your original impressions of the firms. Try to evaluate the cultures and decisions of each firm as if you had no idea whether they were ethical. Were you accurate in your impressions or do they need to be modified slightly? Refer students to the following website, a page devoted to support and criticism of Wal-Mart: http://www.businessethics.ca/wal-mart/. This exercise also provides an opportunity to examine the difference between a good/bad corporate culture, and good/bad individuals. What if anything, beside the individuals who work within them, makes an organization ethical or unethical? Evaluating whether a firm is ethical involves considering various factors that contribute to its overall behavior and impact on society. These factors can include its treatment of employees, environmental practices, adherence to laws and regulations, transparency in business dealings, and commitment to social responsibility. Often, our judgment of a firm's ethics is shaped by its reputation, which can be influenced by media coverage, word of mouth, and public perception. However, it is important to delve deeper and examine the facts behind each element to make a more informed evaluation. One firm that I believe to be ethical is Patagonia. My conclusion is based on several factors. First, Patagonia is known for its commitment to environmental sustainability. The company uses organic cotton, recycled materials, and invests in renewable energy. Second, Patagonia has a strong focus on corporate social responsibility, supporting environmental initiatives and fair labor practices. Third, Patagonia has a transparent business model, openly sharing information about its supply chain and efforts to reduce its environmental footprint. In contrast, one firm that I consider to have questionable values is Volkswagen (VW). My conclusion is based on the emissions scandal in which VW was found to have manipulated emissions tests to make their diesel vehicles appear cleaner than they were. This incident raised concerns about VW's commitment to ethical behavior and transparency. To evaluate these firms' cultures and decisions more objectively, I would conduct research using the Internet and other sources to gather information about their practices, policies, and reputations. I would look for evidence of ethical behavior, such as certifications, awards, and corporate social responsibility reports. I would also consider any controversies or legal issues the firms have been involved in and assess the impact of their decisions on stakeholders and society. After conducting this research, I would compare my original impressions with the findings to see if they align. If there are discrepancies, I would modify my impressions accordingly to ensure a more accurate evaluation of the firms' ethics. 3. You will need to draft a memorandum to your chief executive identifying the value of a triple bottom line approach, which would represent an enormous shift from the firm’s current orientation. What are the three key points that you could make and how would you best support this argument? This question raises a topic that will become very relevant for Chapter 9 (p. 372), but it is useful to introduce it here. What factors, other than financial bottom line, should be considered in evaluating the performance of a firm? Students will consider social, economic, environmental aspects. • Information on TBL can be found at http://www.economist.com/node/14301663 • There is an interesting critique of the TBL at http://www.businessethics.ca/3bl/ in areas of economics, environment and economics. Memorandum To: Chief Executive Officer From: [Your Name] Date: [Date] Subject: The Value of Adopting a Triple Bottom Line Approach I am writing to propose the adoption of a triple bottom line approach for our firm, which represents a significant shift from our current orientation. This approach emphasizes not only financial performance but also social and environmental impact. I believe that implementing a triple bottom line approach will not only benefit society and the environment but also enhance our long-term financial sustainability and reputation. Key Points: 1. Enhanced Reputation and Stakeholder Relations: Adopting a triple bottom line approach can enhance our reputation among stakeholders, including customers, investors, employees, and communities. By demonstrating our commitment to social and environmental responsibility, we can build trust and loyalty among these groups, which can translate into increased customer loyalty, investor confidence, and employee engagement. 2. Risk Mitigation and Long-Term Sustainability: Embracing a triple bottom line approach can help us mitigate risks associated with environmental and social issues. By proactively addressing these issues, we can avoid costly regulatory fines, lawsuits, and reputational damage. Additionally, focusing on long-term sustainability can help us identify new business opportunities and markets, reducing our reliance on finite resources and volatile markets. 3. Competitive Advantage and Innovation: Adopting a triple bottom line approach can also provide us with a competitive advantage in the marketplace. Consumers are increasingly demanding products and services from companies that demonstrate ethical and sustainable practices. By aligning our values with those of our customers, we can differentiate ourselves from competitors and attract new business. Furthermore, a focus on sustainability can drive innovation, leading to the development of new products, processes, and business models that can further enhance our competitiveness. Supporting Arguments: • Provide examples of other companies that have successfully implemented a triple bottom line approach and the benefits they have realized. • Highlight case studies or research that demonstrates the financial and non-financial benefits of adopting a triple bottom line approach. • Outline specific steps and initiatives that we can take to implement a triple bottom line approach, including setting measurable goals and targets. In conclusion, I strongly believe that adopting a triple bottom line approach is not only the right thing to do ethically but also makes good business sense. By considering the social, environmental, and financial impacts of our decisions, we can create long-term value for our company, our stakeholders, and society as a whole. I look forward to discussing this proposal further and exploring how we can begin to integrate a triple bottom line approach into our business strategy. Thank you for your consideration. Sincerely, [Your Name] 4. Now that you have an understanding of corporate culture and the variables that impact it, how would you characterize an ethically effective culture, one that would effectively lead to a profitable and valuable long-term sustainability for the firm? Walk students through a discussion on the definition and application of an ethically effective culture. Refer students to SustainAbility.org: http://www.sustainability.org, for an example of the elements of an ethical corporate culture. It is useful here to distinguish an ethically praiseworthy culture in principle from one that has been effectively applied in practice. In this regard, students can be directed to research Enron’s corporate statements on ethics. An ethically effective corporate culture is one that not only prioritizes ethical behavior but also integrates ethics into every aspect of the organization's operations. Such a culture is characterized by several key elements: 1. Ethical Leadership: The tone is set at the top, with leaders demonstrating a commitment to ethics through their actions and decisions. Leaders communicate clear ethical standards and expectations and hold themselves and others accountable for ethical behavior. 2. Ethical Norms and Values: The organization promotes and upholds a set of ethical norms and values that guide decision-making at all levels. These norms and values align with the organization's mission and are reflected in its policies, practices, and relationships with stakeholders. 3. Transparency and Open Communication: There is a culture of transparency where information is openly shared, and employees feel comfortable speaking up about ethical concerns. Open communication channels facilitate the exchange of ideas and feedback, fostering a culture of trust and collaboration. 4. Ethical Decision-Making Processes: The organization has established processes for making ethical decisions, such as ethical guidelines, decision-making frameworks, and ethical committees. These processes help employees navigate ethical dilemmas and ensure that decisions are consistent with the organization's values. 5. Accountability and Consequences: There are clear mechanisms in place to hold individuals accountable for unethical behavior. This includes fair and consistent enforcement of ethical standards and consequences for violations, regardless of the individual's position within the organization. 6. Ethical Training and Development: The organization provides ongoing training and development opportunities to help employees understand and apply ethical principles in their work. This includes ethics training for new hires, refresher courses, and opportunities for ethical leadership development. 7. Integration of Ethics into Strategy and Operations: Ethics is integrated into the organization's strategic planning and day-to-day operations. Ethical considerations are taken into account in decision-making processes, risk assessments, and performance evaluations. 8. Stakeholder Engagement and Responsiveness: The organization engages with and responds to the needs and concerns of its stakeholders, including employees, customers, suppliers, and the community. This includes seeking feedback, addressing grievances, and promoting ethical behavior in stakeholder interactions. An ethically effective culture not only contributes to long-term sustainability but also enhances the firm's reputation, builds trust with stakeholders, and creates a positive work environment. By prioritizing ethics, organizations can achieve sustainable profitability while also making a positive impact on society. 5. One element that surely impacts a firm’s culture is its employee population. While a corporate culture can shape an employee’s attitudes and habits, it will do so more easily if people who have already developed those attitudes and habits are hired in the first place. How would you develop a recruitment and selection process that would most successfully allow you to hire the best workers for your particular culture? Should you get rid of an employee who does not share the corporate culture? If so, how would you do that? The University of Notre Dame has developed a document highlighting the importance of ethics in the recruitment process. The document lists the benefits of working for an ethical company, as well as the benefits of hiring ethical individuals. The document also provides lists of unethical behaviors that employers and employees should avoid. A few examples of the questions listed are: • Have you taken a course in “business ethics?” What does “business ethics” mean to you? • How have you dealt with a specific ethical issue either as a student or an employee? • What elements of your personal code of ethics influence you to make ethical decisions? • If you were asked by your supervisor to undertake an action that you thought was unethical, how would or did you respond? What about if it was your co-worker? Developing a Recruitment and Selection Process for Hiring the Best Workers for Your Corporate Culture: 1. Define Your Corporate Culture: Start by defining your corporate culture, including its values, mission, and key behaviors. This will serve as a foundation for identifying candidates who align with your culture. 2. Incorporate Culture Fit into Job Descriptions: Integrate elements of your corporate culture into job descriptions to attract candidates who resonate with your values. Highlight the aspects of your culture that make your organization unique and desirable to potential employees. 3. Behavioral Interviewing: Use behavioral interviewing techniques to assess candidates' past behavior and determine if they demonstrate the attitudes and habits that align with your culture. Ask questions that probe into their values, decision-making process, and approach to teamwork. 4. Culture Fit Assessments: Consider implementing culture fit assessments or surveys to evaluate candidates' compatibility with your corporate culture. These assessments can help you identify candidates who are more likely to adapt and thrive in your organization. 5. Employee Referrals: Encourage employee referrals as they are more likely to refer candidates who are a good fit for your culture. Employee referrals can also help create a more cohesive and engaged workforce. 6. Onboarding Process: Develop a comprehensive onboarding process that introduces new hires to your corporate culture. Provide training and resources that reinforce your values and help new employees assimilate into your organization. Handling Employees Who Do Not Share the Corporate Culture: 1. Identify Misalignment: Clearly identify the areas where the employee's behavior or attitudes do not align with the corporate culture. Provide specific examples and communicate your expectations for alignment. 2. Provide Feedback and Coaching: Offer feedback and coaching to help the employee understand the importance of the corporate culture and how their behavior impacts the organization. Provide guidance on how they can better align with the culture. 3. Develop a Performance Improvement Plan (PIP): If the employee continues to exhibit behaviors that are inconsistent with the corporate culture, develop a performance improvement plan (PIP) that outlines specific steps for improvement. Set clear goals and timelines for improvement. 4. Consider Termination as a Last Resort: Termination should be considered as a last resort if the employee is unable or unwilling to align with the corporate culture despite efforts to coach and support them. Ensure that termination is done in accordance with company policies and legal requirements. 5. Exit Interview: Conduct an exit interview to understand the reasons for the employee's departure and gather feedback on the corporate culture. Use this feedback to make improvements and ensure a better cultural fit for future hires. Developing a recruitment and selection process that focuses on hiring candidates who align with your corporate culture can help create a more engaged and productive workforce. Similarly, addressing employees who do not share the corporate culture with sensitivity and professionalism can help maintain a cohesive and positive work environment. 6. What are some of the greatest benefits and hazardous costs of compliance-based cultures? Refer students to the chapter’s discussion of benefits and costs of compliance-based cultures. Ask students to describe their own experiences in ‘compliance-based” organizations, e.g., school, workplace, church, sports teams. Benefits of Compliance-Based Cultures: 1. Legal and Regulatory Compliance: Compliance-based cultures ensure that organizations adhere to relevant laws, regulations, and industry standards. This reduces the risk of legal penalties, fines, and reputational damage. 2. Ethical Standards: Compliance-based cultures often emphasize ethical behavior and integrity. This can enhance the organization's reputation, build trust with stakeholders, and attract top talent. 3. Risk Management: By focusing on compliance, organizations can identify and mitigate risks related to legal, financial, and operational issues. This leads to a more stable and sustainable business environment. 4. Operational Efficiency: Compliance-based cultures promote standardized processes and procedures, which can improve operational efficiency and reduce errors and inefficiencies. 5. Employee Engagement: Employees in compliance-based cultures are often more engaged, as they understand the importance of following rules and procedures. This can lead to higher productivity and job satisfaction. Hazardous Costs of Compliance-Based Cultures: 1. Overemphasis on Rules: A compliance-based culture may lead to an overemphasis on rules and procedures, stifling innovation and creativity. This can hinder the organization's ability to adapt to change and respond to new challenges. 2. Risk Aversion: Organizations in compliance-based cultures may become overly risk-averse, avoiding potentially beneficial opportunities due to fear of non-compliance. This can limit growth and innovation. 3. Lack of Flexibility: Compliance-based cultures may be rigid and inflexible, making it difficult to respond quickly to changing market conditions or customer needs. 4. Employee Disengagement: Employees may feel constrained by strict rules and regulations, leading to disengagement and decreased morale. This can negatively impact productivity and employee retention. 5. Costs of Compliance: Maintaining compliance with laws and regulations can be costly, requiring investment in resources such as training, technology, and legal counsel. In conclusion, while compliance-based cultures offer important benefits in terms of legal compliance, ethical standards, and risk management, organizations must also be mindful of the potential costs, such as stifled innovation, risk aversion, and employee disengagement. It is important to strike a balance between compliance and flexibility, ensuring that the culture supports both ethical behavior and organizational agility. 7. Assume you have a number of suppliers for your global apparel business. You have in place a code of conduct both for your workplace and for your suppliers. Each time you visit a particular supplier, even on unannounced visits, it seems as if that supplier is in compliance with your code. However, you have received communications from that supplier’s employees that there are violations. What should you do? Suggestions for steps to take: interview the workers, do additional spot-checks, get locals to visit at unannounced times, interview former employees (if possible) for information about their practices. Addressing Supplier Code of Conduct Violations: 1. Investigate the Allegations: Begin by conducting a thorough investigation into the allegations of code of conduct violations. Interview the supplier's employees who have reported violations and gather any evidence or documentation they may have. 2. Review Compliance Processes: Evaluate the effectiveness of your compliance monitoring processes. Determine if there are any gaps or weaknesses that may have allowed violations to occur without detection. 3. Engage with the Supplier: Schedule a meeting with the supplier to discuss the allegations and present the evidence gathered during the investigation. Allow the supplier to provide their perspective and any mitigating factors. 4. Discuss Corrective Actions: If the violations are confirmed, work with the supplier to develop a corrective action plan. This plan should outline specific steps the supplier will take to address the violations and prevent future occurrences. 5. Monitor Compliance: Regularly monitor the supplier's compliance with the corrective action plan. Conduct follow-up visits and audits to ensure that the violations have been addressed and that the supplier is maintaining compliance with your code of conduct. 6. Consider Termination: If the supplier fails to comply with the corrective action plan or if violations persist, consider terminating the business relationship. Ensure that termination is done in accordance with any contractual obligations and with due consideration for the impact on your business operations. 7. Communicate with Stakeholders: Keep your stakeholders informed about the situation and the actions you are taking to address it. This may include employees, customers, investors, and advocacy groups. 8. Continuous Improvement: Use the experience as an opportunity to improve your supplier monitoring and compliance processes. Identify lessons learned and implement changes to prevent similar violations in the future. In conclusion, it is crucial to take allegations of code of conduct violations seriously and to address them promptly and effectively. By investigating the allegations, engaging with the supplier, and implementing corrective actions, you can uphold the integrity of your global apparel business and maintain compliance with your code of conduct. 8. You are aware of inappropriate behavior and violations of your firm’s code of conduct throughout your operation. In an effort to support a collegial and supportive atmosphere, however, you do not encourage coworkers to report on their peers. Unfortunately, you believe that you must make a shift in that policy and institute a mandatory reporting structure. How would you design the structure and how would you implement the new program in such as way that the collegiality that exists is not destroyed? Suggestions might include: ensure anonymous reporting is available, maintain confidentiality, enforce a non-retaliation policy, provide a supportive culture, be proactive rather than reactive, model collegial and supportive behavior in all organizational practices. Designing and Implementing a Mandatory Reporting Structure for Code of Conduct Violations: 1. Develop Clear Reporting Procedures: Design clear and user-friendly reporting procedures that outline how employees should report code of conduct violations. Ensure that the procedures are easily accessible and understandable for all employees. 2. Provide Training and Education: Educate employees about the importance of reporting violations and the new reporting structure. Provide training on how to recognize and report violations, as well as the potential consequences of non-compliance. 3. Establish Confidential Reporting: Implement a confidential reporting system to protect the identity of employees who report violations. Assure employees that their reports will be handled discreetly and without fear of retaliation. 4. Promote a Culture of Accountability: Emphasize the importance of accountability and ethical behavior throughout the organization. Encourage employees to take responsibility for their actions and to report violations they witness. 5. Offer Support Services: Provide support services, such as counseling or employee assistance programs, for employees who may be affected by reporting violations. Ensure that employees feel supported and valued throughout the reporting process. 6. Implement Consequences for Non-Reporting: Clearly communicate the consequences of failing to report code of conduct violations. Establish disciplinary measures for employees who knowingly withhold information about violations. 7. Monitor and Evaluate the Reporting Structure: Continuously monitor the effectiveness of the reporting structure and make adjustments as needed. Solicit feedback from employees to identify any challenges or areas for improvement. 8. Maintain a Positive Work Environment: Despite the change in reporting policy, emphasize the importance of maintaining a collegial and supportive work environment. Encourage teamwork, open communication, and mutual respect among employees. Implementing a mandatory reporting structure for code of conduct violations is a critical step in upholding ethical standards and maintaining a positive organizational culture. By designing clear procedures, providing education and support, and fostering a culture of accountability, you can ensure that the reporting structure is effective while preserving the collegiality and supportiveness that exist within your organization. 9. Wasta is the term used in the United Arab Emirates (UAE) for favoritism. In the UAE, it is a highly valued element of the culture. In fact, while nepotism might be kept under wraps or discussed in hushed tones in an American firm, Wasta is more likely to be worn on one’s sleeve among UAE professionals. It is precisely who-you-know that often dictates the position you might get in many companies or how fast you might get approved for certain processes. If you were assigned to build and then lead a team based in the UAE that would be comprised of both UAE nationals (called “Emiratis”) as well as US ex-pats, how might you most effectively respond to this culture of historical and embedded preferential treatment, reflecting the local realities, while at the same time respecting your own or your home country’s value structure, if different? This question is based on challenges identified by Ethisphere’s Erin Russell, who suggests the following guidance: In a relationship-centric culture as the United Arab Emirates, simply putting the kibosh on preferential treatment via an anti-nepotism policy may be ineffective at the very least, and more likely regarded as naïve or desensitized to a culture in which these situations are not only possible but occur frequently. Policies should adequately account for certain realities. A good start would be to implement a training program that emphasizes the importance of employee and prospect qualification and performance, and then takes into consideration waste. To enhance the cohesiveness of the workforce, it would also be worthwhile to train foreign employees on the local emphasis on relationships and loyalty. Russell, E., “Global Compliance: United Arab Emirates,” http://ethisphere.com/global-compliance-united-arab-emirates/. Building and Leading a Team in the UAE: 1. Understanding the Cultural Context: Recognize and respect the cultural norms and values of the UAE, including the importance of wasta in their business culture. Understand that wasta is deeply ingrained in the local culture and may impact how business is conducted. 2. Balancing Local Realities with Home Country Values: Acknowledge the differences in cultural values between the UAE and your home country. While wasta may be accepted and even expected in the UAE, it may conflict with the values of meritocracy and fairness that are valued in your home country. 3. Promoting Transparency and Fairness: Strive to create a team environment that promotes transparency and fairness in decision-making. Clearly communicate the criteria for performance evaluation, promotion, and other processes to ensure that all team members understand the expectations. 4. Emphasizing Merit-Based Advancement: Encourage a culture of meritocracy within your team, where advancement is based on skills, qualifications, and performance rather than personal connections. Recognize and reward employees based on their contributions and achievements. 5. Building Relationships: While respecting the local culture, also focus on building positive relationships with team members based on mutual respect and trust. Demonstrate that you value their contributions and are committed to their professional development. 6. Leading by Example: Lead by example and demonstrate the values and behaviors you wish to promote within your team. Show that you value integrity, fairness, and professionalism in all aspects of your work. 7. Seeking Guidance: If unsure about how to navigate cultural differences, seek guidance from local mentors or colleagues who have experience working in the UAE. They can provide valuable insights and advice on how to effectively lead a team in this cultural context. By understanding and respecting the cultural nuances of the UAE, while also upholding your own values, you can build and lead a successful team that thrives in a diverse and multicultural environment. 10. A large United States–based corporation has decided to develop a mission statement and then conduct training on a new ethics program. It engages you to assist in these endeavors. What activities would you need to conduct in order to complete this project? What are some of the concerns you should be sure to consider? Direct students to the Ethics Resource Center (www.ethics.org), which provides a “How To” on mission statements. Students should walk through the mission statement process step by step, ensuring that all stakeholders are invited to participate, that the mission applies to all levels of the firm, and that the mission will actually move the firm forward. Activities to Develop a Mission Statement and Conduct Ethics Training: 1. Research and Analysis: Conduct research to understand the company's values, goals, and current ethical culture. Analyze the company's history, industry standards, and best practices in ethics programs. 2. Stakeholder Engagement: Engage with key stakeholders, including executives, employees, customers, and shareholders, to gather input and feedback on the mission statement and ethics program. 3. Mission Statement Development: Facilitate workshops or meetings to develop a mission statement that aligns with the company's values and goals. Ensure that the mission statement is clear, concise, and inspirational. 4. Ethics Program Design: Develop a comprehensive ethics program that includes policies, procedures, training materials, and communication strategies. Ensure that the program addresses key ethical issues relevant to the company's industry and operations. 5. Training Development: Create training materials, presentations, and workshops to educate employees on the new ethics program. Incorporate case studies, interactive activities, and real-life examples to enhance learning and engagement. 6. Implementation Planning: Develop a plan for implementing the mission statement and ethics program, including timelines, responsibilities, and communication strategies. Ensure that all employees are aware of the new program and understand their roles in upholding ethical standards. 7. Evaluation and Feedback: Establish metrics and mechanisms for evaluating the effectiveness of the mission statement and ethics program. Gather feedback from employees and stakeholders to identify areas for improvement. Concerns to Consider: 1. Cultural Differences: Consider the company's global presence and diverse workforce. Ensure that the mission statement and ethics program are inclusive and relevant to all employees, regardless of their background or location. 2. Legal and Regulatory Compliance: Ensure that the ethics program complies with relevant laws and regulations in all jurisdictions where the company operates. Consult with legal experts to address any legal concerns. 3. Employee Buy-In: Engage employees early in the process to ensure their buy-in and commitment to the new mission statement and ethics program. Address any concerns or resistance through open communication and dialogue. 4. Resource Allocation: Consider the resources required to develop, implement, and maintain the mission statement and ethics program. Ensure that adequate resources are allocated to support these initiatives effectively. 5. Leadership Support: Secure buy-in and support from senior leadership to ensure the success of the mission statement and ethics program. Leadership commitment is essential for fostering a culture of ethics and integrity within the organization. By carefully planning and executing these activities, you can assist the corporation in developing a mission statement and ethics program that align with its values and goals, while also addressing key concerns and ensuring compliance with legal and ethical standards. 11. Put yourself in the position of someone who is establishing an organization from the ground up. What type of leader would you want to be? How would you create that image or perception? Do you create a mission statement for the firm and/or a code of conduct? What process would you use to do so? Would you create an ethics and/or compliance program and how would you then integrate the mission statement and program throughout your organization? What do you anticipate might be your successes and challenges? One can lead students in discussion of this scenario in various ways. Small groups of students can be assigned to develop their own organizational culture. Students can be asked to interview small business owners, or student entrepreneurs, to learn how such things have been done elsewhere. Students can simply be asked to conduct an informal survey of local businesses to discover how many have their own code of ethics, mission statements, compliance programs, or ethics officers. Establishing an Organization from the Ground Up: Leadership Style: As a leader establishing an organization from the ground up, I would strive to be a transformational leader. This style of leadership focuses on inspiring and motivating employees to achieve their full potential, fostering innovation, and creating a positive organizational culture. I would lead by example, demonstrating integrity, empathy, and a strong commitment to ethical behavior. Creating an Image of Leadership: To create the desired image or perception, I would emphasize transparency, open communication, and inclusivity. I would actively engage with employees, stakeholders, and the community to build trust and credibility. I would also seek feedback and input from others to demonstrate a willingness to listen and learn. Mission Statement and Code of Conduct: I would create both a mission statement and a code of conduct for the firm. The mission statement would outline the organization's core values, goals, and purpose, while the code of conduct would establish guidelines for ethical behavior and decision-making. To develop these, I would engage key stakeholders, including employees, customers, and partners, to ensure alignment with their expectations and values. Ethics and Compliance Program: I would establish an ethics and compliance program to ensure that the organization operates with integrity and in compliance with relevant laws and regulations. This program would include policies, procedures, training, and monitoring mechanisms to promote ethical behavior and prevent misconduct. I would integrate the mission statement and ethics program throughout the organization by incorporating them into all aspects of the business, from hiring and onboarding to performance evaluation and decision-making processes. Anticipated Successes and Challenges: One anticipated success would be the creation of a strong organizational culture built on trust, integrity, and ethical behavior. This culture would attract top talent, foster innovation, and enhance the organization's reputation. However, challenges may arise in maintaining this culture as the organization grows and faces external pressures. It may be challenging to ensure consistent adherence to the mission statement and code of conduct across all levels of the organization, particularly as it expands globally. Regular communication, training, and monitoring will be essential to address these challenges and uphold the organization's ethical standards. 12. With regard to employee recognition in the work place, what effects would a program like “employee of the month” have on the corporate culture, and what factors might lead you to recommend it as a motivational program for your company? Lead students in a discussion of previous personal experiences in the workplace. Have they been involved in “employee of the month” programs? Have they ever been the employee of the month? What impacts did it have on the corporate culture or the general atmosphere in the workplace and the work relationship between co-workers? What could have been improved to make the program more effective and impactful? Impact of an "Employee of the Month" Program on Corporate Culture: An "Employee of the Month" program can have both positive and negative effects on corporate culture, depending on how it is implemented and perceived by employees. Positive Effects: 1. Recognition and Motivation: Employees who are recognized as "Employee of the Month" feel valued and appreciated, which can increase their motivation and job satisfaction. 2. Competition and Performance: The program can create healthy competition among employees, encouraging them to perform at their best to be recognized. 3. Team Morale: Recognizing individual achievements can boost team morale and create a positive work environment. 4. Goal Alignment: The program can align individual goals with organizational goals, as employees strive to meet and exceed expectations to be recognized. Negative Effects: 1. Jealousy and Resentment: If the program is perceived as unfair or biased, it can lead to jealousy and resentment among employees who feel they deserve recognition. 2. Exclusivity: If the same employees are recognized repeatedly, it can create a sense of exclusivity and alienate other employees. 3. Focus on Individual Performance: The program may inadvertently promote individualism over teamwork, as employees focus on personal achievements rather than collective goals. Recommendation for Implementation: To recommend an "Employee of the Month" program as a motivational program for a company, the following factors should be considered: • Transparency: The selection criteria should be clear, fair, and transparent to avoid perceptions of favoritism. • Inclusivity: The program should be inclusive and recognize a diverse range of contributions, not just performance metrics. • Consistency: The program should be consistently implemented and not be influenced by personal biases or preferences. • Feedback: Regular feedback from employees should be solicited to assess the effectiveness of the program and make improvements if necessary. • Integration: The program should be integrated into the broader organizational culture and values, reinforcing desired behaviors and attitudes. Discussion Points: In discussing personal experiences with "Employee of the Month" programs, students may share: • Whether they have been involved in such programs and how it impacted their motivation and job satisfaction. • If they have been the "Employee of the Month," how it affected their relationship with co-workers and their perception of the company culture. • Suggestions for improving the program, such as including peer nominations, expanding recognition beyond individual performance, or offering tangible rewards in addition to recognition. Overall, an "Employee of the Month" program can be a valuable tool for recognizing and motivating employees, but it must be implemented thoughtfully and with consideration for its impact on the corporate culture. 13. Identify an industry in which you would like to work, and choose a company for whom you would like to work, ideally. Use the company's website to learn about their core values and culture in order to find your best fit and then please explain your choice. Then, please identify a company at which you would not like to work based on its core values and culture; and explain your reasons. Lead students in a discussion to (1) identify the core values that are important to them, (2) how important it is to them that an employer share those values, (3) how they could go about identifying which companies do, indeed, share those values, and (4) how they could contribute to the value system of a potential employer or go about helping to change the values of the company for the better. Industry and Company Choice: Industry and Company I Would Like to Work for: I would like to work in the technology industry, and one company I admire is Google. Google's core values, as outlined on their website, include a focus on innovation, a commitment to diversity and inclusion, and a dedication to making a positive impact on the world. These values align with my personal beliefs and aspirations. I appreciate Google's emphasis on creativity and forward-thinking, as well as their efforts to create a diverse and inclusive workplace. Company I Would Not Like to Work for: On the other hand, a company whose core values and culture do not align with mine is a fictional pharmaceutical company that prioritizes profit over ethics. This company may cut corners in research and development, engage in price gouging for life-saving medications, and prioritize shareholder profits over the well-being of patients. Such a culture would conflict with my values of integrity, social responsibility, and ethical business practices. Chapter 4 Readings Summaries and Main Points Reading 4-1 “Leadership in a Values-Based Organization” by Ralph Larsen, CEO, Johnson & Johnson Main Points • Leading a company like Johnson & Johnson, with a strong foundation built on values and a heritage based on ethical principles, is very special. There are certain boundaries in place: things you simply don’t do, well-accepted management practices that just won’t work, changes that just won’t stick, parts of our history that simply won’t give way to certain new ideas. • Johnson & Johnson’s strong values have been instrumental in our charting a course that has proved successful. • At Johnson & Johnson, the credo is the glue that holds our decentralized company together. • In essence, it says that our first responsibility is to our customers, to give them high-quality products at fair prices. Our second responsibility is to our employees, to treat them with dignity and respect and pay them fairly. Our third responsibility is to the communities in which we operate, to be good corporate citizens and protect the environment. And then, it says that our final responsibility is to our shareholders, to give them a fair return. • In the final analysis, the Credo is built on the notion that if you do a good job in fulfilling the first three responsibilities, then the shareholder will come out all right. That is exactly what has happened over all these years, and that is what we continue to strive for today. • As the chief executive officer, I am ultimately accountable for everything that happens, both good and bad. But more than anything else, I am responsible for the tone at the top. To run a good and decent company with good and decent people. I work hard at setting the right tone. • Our credo isn’t about us being responsible FOR something, but rather TO someone or some group. • During my tenure at Johnson & Johnson, I’ve spent more time on people issues than anything else by far. People decisions are the ones that keep me awake at night. • This new world meant that we could no longer guarantee that if you came to work every day and did your job well, you could count on being employed with us for life. That’s the way it used to be, but that was a responsibility that we could no longer fulfill. • Rather, we had to focus on making people employable for life. And that’s where we put our resources, at life-long development of skill sets that could be used in many different companies and industries. • The bright side to all of this is that being responsible to people has a tendency to become mutual. If I am responsible to you, you are more likely to be responsible to me, and that means I have colleagues I can trust. • The most important thing is to set the proper personal example, the tone at the top. • Make sure the company you join has a set of core values that you are comfortable with, that you are proud of, and which will bring out the very best in you. Reading 4-2 “Assessment and Plan for Organizational Culture Change at NASA” from the Behavioral Science Technology report to NASA Main Points: • In the aftermath of the 2003 Space Shuttle Columbia disaster, the Columbia Accident Investigation Board (CAIB) found that NASA’s history and culture contributed as much to the accident as any technical failure. • It seems that over time cultural traits and organizational practices detrimental to safety and reliability were allowed to develop. In the Board’s view, NASA’s organizational culture and structure had as much to do with the accident as the External Tank foam. • As a result of this report, NASA established the objective of completely transforming its organizational and safety culture. • BST was hired as an outside consulting firm to conduct an assessment of the current status and develop an implementation plan. • The assessment concluded that there are many positive aspects to the NASA culture, but there are important needs for improvement, especially the need for reflection of the Agency’s espoused core values of Safety, People, Excellence, and Integrity. • BST identified a three-year plan for change and improvement within NASA’s culture. Summary This executive summary discusses the results of a report following the Space Shuttle Columbia disaster in 2003. The Columbia Accident Investigation Board (CAIB) found that NASA’s history and culture contributed as much to the Columbia accident as any technical failure. As a result of the CAIB and related activities, NASA established the objective of completely transforming its organizational and safety culture. An outside consulting firm, Behavioral Science Technology (BST), was hired to recommend changes in the organization. The first task assigned to BST was to conduct an assessment of the current status and develop an implementation plan. This assessment concluded that there are many positive aspects to the NASA culture, such as the long legacy of technical excellence, a spirit of teamwork and pride, and a can-do approach to task achievement. In particular, culture attributes related to work group functioning at the peer level are very strong. Despite these positive attributes, there are some important needs for improvement. The present NASA culture does not yet fully reflect the Agency’s espoused core values of Safety, People, Excellence, and Integrity. BST recommended an initiative with the theme of fostering cultural integrity. This initiative should address working through existing leaders to instill behaviors consistent with the Agency’s values and the desired culture, while also establishing the foundation for developing future leaders who will sustain that culture and individual contributors who reflect the desire culture in their actions. A three-year plan was identified for change and improvement within NASA’s culture. The CAIB investigated the causes of the Columbia accident and identified organizational causes for the disaster. Specifically, it seems that over time cultural traits and organizational practices detrimental to safety and reliability were allowed to develop. In the Board’s view, NASA’s organizational culture and structure had as much to do with the accident as the External Tank foam. Reading 4-3 “Does the Company Get It?” by OCEG Main Points • This OCEG questionnaire has been designed as a tool that can be used to determine whether a company has an effective process and culture in place to control and mitigate compliance and ethics related risks. • Questions 1 through 3 address organizational culture to determine if a company is taking the formal steps necessary to address the subject of compliance and ethics—& whether management, the Board of Directors and the employees really believe that compliance and ethics are an integral part of the company’s corporate culture. • Questions 4 and 5 consider scope and strategy of the compliance and ethics program, assessing how thoroughly it can address potential risks. • Questions 6 through 8 identify the structure and resources dedicated to the ethics and compliance program, judging the seriousness of commitment to effective management of the program. • Questions 9 through 14 evaluate management of policies and training, and further address program adequacy by looking at the mechanics of the processes in place. • Questions 15 through 18 focus on internal enforcement, assessing whether the company appropriately and consistently deals with violations of established policies and procedures. • Questions 19 and 20 assess evaluation and continual improvement efforts in the compliance and ethics program. Reading 4-4 "An Empirical Study of Whistleblower Policies in United States Corporate Codes of Ethics" by Richard Moberly and Lindsey E. Wylie Main Points • Companies have issued codes of ethics that increasingly contain provisions related to whistleblowing. • U.S. corporations have developed a consensus regarding the contents and scope of whistleblower provisions in corporate Codes. This consensus has emerged despite the facts that U.S. statutory and regulatory law provides little guidance regarding the Codes’ contents. • Sarbanes-Oxley, the SEC regulations, and the stock exchange listing requirements all contain slightly different mandates on who should be covered by a company’s Code of Ethics. • The law rarely requires employees (or any individual) to report illegal behavior. U.S. corporations, however, have responded to this regulatory mandate by going beyond merely “promoting” whistleblowing. Instead, corporations require employees to report misconduct:. • To resolve the question of what violations should be reported, the SEC and the listing standards provide a variety of suggestions. However, many companies expand this basic requirement and require employees to report a broader range of wrongdoing. • Many corporations went beyond these general instructions to point out specific types of misconduct that should be reported. These categories may shed some light on the type of misconduct corporations truly think will be beneficial to have reported. • Many Codes listed several possible recipients of whistleblower reports, either as a primary contact for whistleblowers or a secondary option. By far the most popular person identified as a potential recipient is the employee’s supervisor. • Two other types of recipients were listed by almost half of the Codes: the corporate audit committee and an employee hotline. Hotlines have received mixed reception from actual employee whistleblowers. All of the Codes focused almost exclusively on reporting to internal recipients, as opposed to an external recipient, such as a regulatory authority or Congress. • Employees receive confusing message on who should receive a whistleblowing report. Over two-thirds of the Codes provide different recipients for reports depending on a variety of factors. • Almost all of the companies either promise that the company will not retaliate against an employee whistleblower or affirmatively prohibit retaliation against whistleblowers. • Reports made in good faith, for suspected violations, are generally protected from retaliation. • Despite this lack of guidance, a majority of the company Codes claim that all reports made by whistleblowers will be kept confidential and that all violations can be reported anonymously . • However, because of the strength of the at-will rule in the United States, employees will have a difficult time relying on these policies. Employees may have difficulty enforcing promises not to retaliate legally, but the practical effects of such promises are still understudied.
Summary This study performs a content analysis of the whistleblower provisions of US corporate Codes of Ethics. These codes are based on the requirements imposed by the Sarbanes-Oxley Act, as well as regulations from the SEC and the listing standards of the major stock exchanges. The codes often went beyond what is mandated by the regulations to cover a broader range of employees, as well as contractors and subsidiaries. Although the legal regulations rarely require employees to report illegal behaviors, most companies required that individuals report any illegal conduct they witness. Similarly, while the SEC specifies that violations of the SEC Code of Conduct should be reported, many companies expanded this basic requirement and required employees to report a broader range of wrongdoing. Many corporations went beyond these general instructions to point out specific types of misconduct that should be reported. The most frequently identified misconduct was conflicts of interest, followed by requests that employees report financial reporting problems, and fraud. Few of the Codes identified harassment and discrimination as problems that should be reported. Contrary to the vagueness of the SEC regulations, as well as the exchange standards, many Codes listed several possible recipients of whistleblower reports, either as a primary contact for whistleblowers or a secondary option, particularly the corporate audit committee and an employee hotline. Companies promise whistleblowers protection from retaliation, confidentiality, and anonymity. However, because of the strength of the at-will rule in the United States, employees will have a difficult time enforcing these promises,
Reading 4-5 "Greg Smith, Goldman Sachs, and the Importance of Corporate Culture" by Chris MacDonald Main Points Greg Smith’s letter: • The trajectory of Goldman Sachs' culture, its people and its identity has led to a toxic and destructive environment • At Goldman, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money • Culture was a vital part of Goldman's success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by their clients. • A culture based around making money alone will not sustain a firm for long. • Goldman's current management has lost hold of the firm's culture. This decline in the firm's moral fiber represents the single most serious threat to its long-run survival. • I have always taken pride in advising my clients to do what I believe is right for them, even if it makes less money to the firm. This view is becoming increasingly unpopular at Goldman. • The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example, and doing the right thing. Today if you make enough money for the firm, you will be promoted into a position of influence. • The basic truth is that if clients don't trust you they will eventually stop doing business with you, no matter how smart you are. • The board of directors must make the client the focal point of their business again. Without clients, they will not exist. MacDonald’s analysis: • The key to why Greg Smith's letter caused an uproar is that it tapped into every customer's fear that someone who is supposed to be looking out for us is instead trying to screw us. • In many cases, in business, all that stands between you the customer and getting ripped off is a mysterious, amorphous thing called 'corporate culture.' • Corporate culture matters because rather than use sticks and carrots, employees adopt the right behaviors voluntarily, to internalize a set of rules about loyal service and fair treatment. Whatever it is that you want employees to be focusing their energies on, corporate culture is the key. • In a reasonably sane market, employees should be serving customers well, on the assumption that good service will result in profits in the long run. • Unfortunately, it's far from clear that Goldman operates in a sane market. If Smith's letter is true and representative of the culture at Goldman Sachs, that means not just that Goldman isn't serving its clients well. It means that Goldman embodies a set of values with the potential to undermine the market itself. Summary This reading has two parts: a letter of resignation by Greg Smith, a Goldman Sachs executive, printed as an op-ed piece in the New York Times, and an analysis of that letter by Chris MacDonald. Smith lays out the reasons for his departure. His primary concern is that the corporate culture at Goldman has changed to a “toxic and destructive environment” where making money for the firm is prioritized over the needs of the client. He refers to the culture at Goldman when he joined the firm, which was marked by a commitment to the client, and contrasts it to the attitudes of his current co-workers. MacDonald points out that Smith’s letter touches consumer’s fears that persons who should guard their interests are taking advantage of them instead. Appendix A: Case report assignment Ask students to choose one of the following companies (or any company that has been in the press) and develop a critical analysis of the ethical issues involved in the case. Their analysis should include the following: • A short description of case • Identification of the ethical issues involved (what was the alleged ethical wrong done, and why is/was it wrong?) • A statement, in their own opinion, of whether it was wrong or not, and more importantly, why? • Thoughts on what could have been done to avoid the problem – do we need more laws & government regulation? What internal controls might have prevented this situation? • Was the problem more a matter of individuals gone wrong, or was it more systemic and organizational? They will need to do some research to get at the facts, but beyond that students should be asked to rely on their own thinking. This case analysis can be used either as a written assignment, or as reports that can be used as an on-going means to begin class discussions. Some examples: Legal Cases: Tyco Imclone Global Crossing WorldCom Adelphia NYSE and Richard Grasso Merrill Lynch Health South Marsh and McLennan Al Dunlap and Sunbeam Activist-lead Consumer Boycotts Wal-Mart Nike McDonalds GAP Body Shop De Beers L’Oreal Nestle Shell Solution Manual for Business Ethics: Decision Making for Personal Integrity and Social Responsibility Laura P. Hartman, Joseph R. Desjardins, Chris MacDonald 9780078029455, 9781259060588, 9781259417856
