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O.C. FerrellUniversity of New Mexico
John FraedrichUniversity of Wyoming
Linda FerrellUniversity of New Mexico
Business EthicsEthical Decision Making
and Cases, Seventh Edition
For in-class note taking, choose Handouts or Notes
Pages from the print options, with three slides per page.
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Chapter 7
Organizational Factors: The Role of Ethical
Culture and Relationships
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Corporate Culture
• Values• Beliefs• Goals• Norms• Groups• Corporate history• Founder
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Corporate Culture
• A set of values, beliefs, goals, norms, and rituals that members or employees of an organization share.
• A company’s history and unwritten rules are a part of its culture.
• An organization’s failure to monitor or manage its culture may result in unethical behavior.
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Two Basic Dimensions Determine an
Organization’s 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
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Ethical Framework and Audit
• Caring
• Apathetic
• Exacting
• Integrative
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Organizational Culture Ethics Audit
• Does the culture reward unethical behavior?
• Does the organization hire people with values perceived as unethical?
• Is the company’s objective to make as much profit as possible?
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Role of Leadership
• To guide and direct others toward the achievement of a goal
• To motivate others and enforce organizational rules and policies
• To influence the corporate culture and ethical posture of the organization (rewards and punishment)
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Interpersonal Relationships
• One of the biggest challenges in business is getting diverse people to work together efficiently and ethically while coordinating their skills.
• Relationships among individuals and within groups are an important part of the proper functioning of a business organization.
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Interpersonal Relationships in Organizations
• Corporation as a moral agent• Variation in employee conduct• Role relationships• Significant others• Differential association• Whistle-blowing
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Interpersonal Relationships in Organizations
• Organizational pressures
– Opportunity and conflict
– Conflict resolution
• How to improve ethical decision making
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Corporation as a Moral Agent
• Organizations can be held accountable for the conduct of their employees and for all business decisions and outcomes.
• The organization is responsible to society for its collective decisions and actions.
• Organizations must be responsible for the correctness of all policies.
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Variation of Employee Conduct
• 10% of employees follow their own values and beliefs
• 40% try to follow company rules and policies
• 40% go along with the work group
• 10% take advantage of the situation if the penalty is low and risk of being caught is low
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Role Relationships
• Total of all relationships in which a person is involved because of his or her position in the organization (role)
• Peers and top managers are the most influential factors in organizational ethical decision making
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Differential Association
• The idea that people learn ethical or unethical behavior while interacting with others who are part of their role-set or other intimate personal groups
• Association with those who are unethical, combined with the opportunity to act unethically, is a major influence on ethical decision making
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Whistle-Blowing
• Exposing an employer’s wrongdoing to outsiders, such as the media or government regulatory agencies
• Whistle-blowers often receive negative performance appraisals, become organizational ‘outcasts,’ and lose their jobs
• Companies often establish internal whistle-blower reporting mechanisms
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Organizational Pressures
• Time
• Middle managers
• Pressure to perform
• Pressure to increase profits
• Top managers
• Low level managers
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Opportunity and Conflict Create Ethical Dilemmas
• Opportunity is the set of conditions that limits unfavorable behavior or rewards favorable behavior
• A person who behaves unethically and is rewarded (or not punished) is likely to continue to act unethically
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Conflict Resolution
• Personal-organizational
• Personal-societal
• Organizational-societal
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Role of Motivation
• To focus employees’ behavior toward goal achievement within the organization
• To understand an individual’s hierarchy of needs and how they influence motivation and ethical behavior
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Centralized Organizations
• Decision making is concentrated at the upper management levels
• Works well in high-risk industries with fewer skilled lower-level employees
• Ethical issues: very little upward communication, less understanding of the interrelatedness of functions, and transferring blame to those who are not responsible
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Decentralized Organizations
• Decision making is delegated as far down the chain of command as possible.
• Control and coordination are relatively informal and personal, and the organization is adaptable and sensitive to external changes.
• Employees are empowered to make decisions; therefore decentralized organizations tend to have fewer formalized ethics programs and policies.
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Group Influence on Organizational Culture
• Formal groups– Committees– Work groups, teams, quality circles
• Informal groups