Creating an Ethical Climate Paul C. Godfrey Marriott School of Management.

Creating an Ethical Climate

Paul C. Godfrey

Marriott School of Management

If we look within the organization and identify the individual who seems most closely connected with the harm—for instance, the

foreman who orders the workers down the dangerous mine shaft or the corporate executive who orders the marketing of an unsafe drug

—we do not find an individual whom we recognize as evil but someone who looks rather like us.

--J. M. Darly (in Anand,Ashforth, and Joshi, 2004)

Q:

A:

Warm Water: Rationalizations

• Denial of Responsibility– Industry practices (the rules of the game)

– Corporate authority (my hands were tied)

• Denial of Injury– Willing participants (they knew what they were getting into)

• Appeal to Higher Loyalties– Survival (this is war)

Warm Water: Shading socializations

• Incrementalism– Downplay harms or evils – Shades of grey

• Euphemistic Language– Political correctness– Shading the truth

• Social Cocoon– Insulation– Shaded from view

So, how do you create an ethical climate???

Strategy

Structure Systems

SharedValues

Staffing Skills

Style

The 7 S Model

Strategy

•Organizational Goals•Competitive Advantages

Structure Systems

•Division of Labor•Reporting

responsibilities

•Coordination•Control

Shared Values

•Common Belief•Priorities

Staffing Skills

•Hiring, Training, Promoting

•Technologies•What we do well

Style

•Interpersonal relationships

Shared Values

• Have a mission statement

• Be mission driven (built to last)

• Code of ethics

• Code of conduct

• Values that are shared

• CSR reporting, transparency reports

Merck & Mectizan

• “We are in the business of preserving and improving human life. All our actions must be measured by our success in achieving this goal.”

• Late 1970’s: Researchers isolate drug that cures river blindness

• River-blindness affects 1 Million worldwide

• Those who need it can’t pay

• Would a donation set a bad precedent?

• 1987: Merck announces donation of Mectizan around the world• “Medicine is for the people. It is not for the profits. The profits follow,

and if we have remembered that, they have never failed to appear.” George W. Merck (1950)

Strategy

Ethics as a cost & constraint(Enron)

Ethics as compliance & citizenship(Intel)

Ethics as a competitive advantage(Whole Foods)

Value

Time

Structure and Systems

• Corporate ethics officer

• Compliance office and staff

• Where to locate– Investor relations– Public relations– General counsel– Independent office

• Defensive systems– Hotlines– Reporting structures– Compliance reviews

• Offensive systems– Performance reviews and

compensation– CSR and initiatives

Staff and Skills

• Training

• New and ongoing for employees

• Conferences and workshops

• Sharing best practices

Style

• The tone at the top

• Ethical leadership

Example: Boeing

A Boeing Leader:

• Charts the course

• Sets high expectations

• Inspires others

• Finds a way

• Lives the Boeing values

• Delivers results

No tradeoff between performance and values

Building in time vs. over time

• Ethics is a part of culture

• Culture takes a long time to build or change

• Culture becomes unseen and taken for granted

Ethics can be neither to be effective