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AISHA OSENI
BBA PGSM
Managing Cultural Diversity within Company
MG 422
Ewan Lee
Creating Ethical Culture in Organisation
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08 - 07 - 2014
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Table of Content
Topics

Pages

Introduction

Question 1
The emphasis on creating an ethical culture has become more prominent
as CEOs are accused of questionable practices.
What can management do to create a more ethical culture?

4-6

Question 2
Explain how a strong culture may actually serve as a liability to an organization
Discussion of how a strong culture could lead to breaches in ethics. Use the Enron
case to guide your essay

7-9

Conclusion

10

References

11

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INTRODUCTION

Ethics refers to a prescribed or accepted code of conduct. Ethical issues are a set of
moral values that need to be addressed while carrying out business. Businesses
operate in a society that is structured around moral values. Therefore, when
conducting its operations, a business has certain responsibilities which are to relate
the moral standing of the organisation to the society. In order to survive, a business
needs to maintain its moral standard.

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Question 1
The emphasis on creating an ethical culture has become more prominent as
large corporations and their CEOs are accused of questionable practices.
What can management do to create a more ethical culture?
Questionable business practice are unethical or unacceptable behaviour in the
internal or external environment of the business organisation. They are basically
behaviour outside the company's code of conduct.
Ethical organisations can said to be organisation comprises of leaders with role
model integrity, open and honest communication, an environment where employees
verbalize wrong doing and a pride in high ethical standards. Despite the evidence
that it is culture that counts leaders usually try to build ethical cultures by putting the
emphasis on compliance, procedures, rules and regulations.(Robbins, 2009). The
question is what can management do to create an ethical organisational culture?
Here are the essentials:
Ethical Leader: An organisation can never be ethical unless its bosses role model
ethical behaviour and set the standards. They have to be clear about their values
and demonstrate them in actions as well as words. Employees look to the behaviour
of top management as a model of whats acceptable behaviour in the workplace.
When senior management is observed by subordinates to take the ethical high road,
it send a positive message for all employees (Robbins, 2009).
Concentrating on The Right Thing: For an ethical culture to prevail, employees
also need to feel responsible and accountable for their actions. In the Ethics in the
Workplace survey , 70% of respondents believed that it is important that employees
feel responsible for and committed to ethical practice. However only just over 40%
believed that employees in their organisations actually did feel responsible. Without
a sense of personal accountability people can blame their boss, the organisation or
someone else. Creating an environment where people are expected to stand up for
what they believe is right and take responsibility is crucial. Without it there can be no
ethical culture as small and large daily wrongdoings will go unchecked. It is the
regular employees who know what is going on. Bad things are hidden from
management so organisations need to create a strong culture of speaking up and
standing up for what is right (Robbins, 2009).

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Ethical Training Courses: It can be difficult to spot an ethical situation in the first
place, let alone knowing the best way to tackle it. All employees need to have the
knowledge and skills to identify and tackle ethical situations as well as the
permission to raise concerns when they have them. Running mandatory ethics
training for everyone in the company signals that ethics is a high priority. By setting
up seminars, workshops, and similar ethical training programs. Use these training
sessions to reinforce the organizations standards of conduct, to clarify what
practices are and are not permissible, and to address possible ethical dilemmas
(Clark, 2003).
Honour Ethical Acts:

Compensating employees for doing the right thing and

challenge them when they do the wrong thing. It can take a lot of courage to raise
concerns about the actions of colleagues. Employees need to be encouraged to do
so by being rewarded in the form of appreciation from management including a
positive mark in their performance appraisal. Colleagues often do not challenge
wrongdoing for fear of exclusion from colleagues and management. They need to be
actively encouraged to do so (Peters, 1985).
Overlook Errors:

Blunders can be tolerated but not when they are made

repeatedly. If people are raid to make mistakes they will either always play it safe
which is not always good for the business or cover any errors up for fear of
punishment. One company gives an annual award for the best mistake made last
year. It is the mistake from which the corporation learned most. It comes back to
people feeling like they can speak up without fear of punishment. Notice that having
a code of conduct is not on the list. It is not a bad thing to have one. But having one
does not guarantee an ethical culture. The problems with codes of conduct are twofold: they cannot possibly cover all situations and eventualities and usually ethical
issues are not as simple as saying this is the right answer. Certainly you can cover
basic rules and standards in a code of conduct but there is no substitute for running
training courses to help people to understand how to identify an ethical issue and
how to go about making decisions to what to do. The conversations that take place
in such workshops will take you much further towards developing an ethical culture
than the best code of conduct in the world will. (Peters, 1985).

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Provide Protective System: The organization needs to provide formal mechanisms

so that employees can discuss ethical dilemmas and report unethical behaviour
without fear of chastise. This might include creation of ethical counsellors,
ombudsmen, or ethical officers. It can also be seen as a way of encouraging whistle
blowers in the organisation, the more the protective measure, more report on
unethical behaviours will be publicised (Peters, 1985).

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QUESTION 2
Organisational culture explain the way things are done in an organisation, in terms of
the values, behaviours and assumptions which dictate the way people approach their
work. Organisational culture is deeply rooted and is different from one environment
to another. Strong Culture affects performance, profit and even survival. The culture
tells people how they should behave and interact, what they should strive for, how
they should communicate, how decisions are made and how much independence
they can enjoy within the company. Culture is a double-edged sword, though. When
its negative, culture saps a small business and its people. Here are some other
situations where a strong culture may be a barrier to action (Albert, 2006).
Barriers to change:
Culture is a liability when the shared values are not in concurrence with those that
will promote the organizations efficiency. This is mostly likely to occur when an
organizations is dynamic. When an environment is undergoing rapid change, an
organizations entrenched culture may no longer be appropriate. So stability of
behaviour is an asset to an organization when it faces a stable environment (Albert,
2006).
Barriers to diversity:
Hiring new employee who, because of race, age, generation, disability, or other
differences, are not like the majority of the organizations members create a paradox.
Management wants new employee to accept the organizations core culture values.
Otherwise , these employee are unlikely to fit in or be accepted. But at same time,
management wants to openly acknowledge and demonstrate support for the
differences that these employee bring support to the workplace (Albert, 2006).

Barriers to acquisitions and Mergers:

Cultural compatibility has become the primary concern. While favourable financial
statement or product line may be the initial attraction of an acquisition candidate,

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whether the acquisition actually works seem to have more to do with how well the
two organizations culture match up.
How a Strong Culture Lead to Breach in Ethics at Enron
An organisation that lack culture emphasize the importance of integrity, honesty, and
trust, compulsory ethics training programs are often destined to fail. Therefore,
creating such a culture is essential to keep away from the collapse of organizations
such as Enron (Sim, 2003).
Some of the factors affecting ethical culture creation, leadership may be the most
influential. Leaders, by representing high levels of sincerity and integrity in their
actions, can model the behaviours that are demanded in an organization. If their
actions contradict their words, establishing a culture of ethics will be extremely
difficult. As an example, Kenneth Lay, which was one of the key leaders and
organizers of the criminal activity and massive fraud that lead to Enrons bankruptcy,
Lay maintains his innocence and lack of knowledge of what was happening. He
blames virtually all of the criminal activities on Fastow. However, Sherron Watkins,
the key Enron whistleblower, maintains that she can provide examples of Lays
questionable decisions and actions. Leaders also have a role in creating a culture of
ethics, because they establish the reward systems being used in a company. There
is a relationship between setting very difficult goals for employees and unethical
behaviour. When leaders create an extremely performance oriented culture where
only results matter and there is no tolerance for missing ones targets, the culture
may start rewarding unethical behaviours. Enron is a brilliant example of this act
where the leaders do not care about how the target is met, they only care about the
result which will indirectly encourage questionable payments or unethical behaviours
because employees want to keep their job.

Integrity was not a trait frequently

exhibited by many of the executive leaders within the culture at Enron.

Jeffrey

Skilling, for example, was a supremely confident, intelligent, and determined leader.
His ability to provide a vision for the company was, by many accounts, amazing and
inspiring. Skillings leadership style was one that exemplified and encouraged
creativity and risk-taking, especially as it related to the maximization of profit and
Enrons share value (Fowler, 2003).
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In the case of Skillings leadership style, however, the maximization of profit was
aggressively taken to such an extreme that the leadership trait of integrity became a
non-factor within the culture at Enron. This lack of integrity was a serious flaw within
the organizational structure and culture of the company (Fowler, 2003).

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COCNLUSION
To curb unethical behaviour in organisational environment, management need to
build or put all crucial mechanism in place which will propel transparency and
accountability in employees dealing either internal or external jurisdiction of the
organisation.

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REFERENCES
Albert, Terry, and Ingulli., (2006). Elaine, Law & Ethics in the Business Environment,
5th edition, Mason, OH: Thomson Learning.

Clark, Margaret M.,JD.,SPHR, "Corporate Ethics Programs Make a Difference, but

not the only difference", HR Magazine, July 1, 2003, page 36.
Driscoll, Dawn M., Hoffman W.,(2000). Ethics Matters: How to Implement ValuesDriven Management. Waltham, MA: Bently College Center for Business Ethics.
Fowler T., (2002). The pride and the fall of Enron. Houston Chronicle,
http://www.chron.com/cs/CDA/story.hts/special/enron/1624822, (Accessed June 25,
2014).

Robbins P., and Judge, T., (2009). Organizational behaviour (13th ed.). Upper
Saddle River, NJ: Pearson Education, Inc.

Sim R., and Brinkmann, J., (2003). Enron ethics (or: Culture matters more than
codes).Journal of Business Ethics, 45(3), 243-256.

Peters J., and Austin N. ,(1985), Passion for Excellence: The Leadership difference.
New York: Ballantine.

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