C HAPTER 7

Organizational Factors: The

Role of Culture and
Relationships
 Chapter Objectives

• To understand the concept of corporate culture

• To examine the influence of corporate culture on
business ethics
• To determine how leadership, power, and motivation
relate to ethical decision making in organizations
• To assess organizational structure and its relationship
to business ethics
• To explore how the work group influences ethical
decisions
• To discuss the relationship between individual and
group ethical decision making
 Chapter Outline

• Defining Corporate Culture

• The Role of Corporate Culture in Ethical Decision
Making
• Leaders Influence Corporate Culture
• Motivating Ethical Behavior
• Organizational Structure and Business Ethics
• Group Dimensions of Corporate Structure and
Culture
• Variation in Employee Conduct
• Can People Control Their Own Actions
• Within a Corporate Culture?
 Ethical Corporate Culture

• Corporate culture includes the behavioral patterns,

concepts, values, ceremonies, and rituals that take
place in the organization
 Corporate Culture

• May be formal statements of values, beliefs, and

customs
• May be informal through direct or indirect comments
conveying management’s wishes
• Two dimensions
– Concern for people
– Concern for performance
 Four Organizational Culture Types

• Apathetic
• Caring
• Exacting
• Integrative
A cultural audit is an assessment
of the organization’s values
 Compliance Versus Value-Based
Culture

• Compliance-based cultures use their legal

departments to determine ethical risk
• Values-based cultures relies on an explicit mission
statement that defines the firm and stakeholder
relations
 Differential Association

• The idea that people learn ethical/unethical behavior

while interacting with others
 Whistle Blowing

• Exposing an employer’s wrongdoing to outsiders

(external to the company)
• The Sarbanes–Oxley Act and the FSGO has
institutionalized whistle-blowing to encourage
discovery of misconduct
 Leaders Can Influence Corporate
Culture

• Five Power Bases

– Reward power: Offering something desirable to
influence behavior
– Coercive power: Penalizing negative behavior
– Legitimate power: Titles and positions of authority
– Expert power: Knowledge based
– Referent power: Exists when goals or objectives
are similar
 Motivation

• A force within the individual that focuses behavior

toward achieving a goal
• An individual’s hierarchy of needs may influence
motivation and ethical behavior
• Needs or goals may change over time
 Organizational Structure and Business
Ethics

• In a centralized organization, decision-making

authority is concentrated in the hands of top-level
managers
• In a decentralized organization, decision-making
authority is delegated as far down the chain of
command as possible
 Groups in Corporate Structure and
Culture

• Formal groups
• Informal groups
• Group norms
Can People Control Their Own Actions
Within a Corporate Culture?

• Organizational ethical decisions often made by

committees and formal and informal groups
• Many decisions are beyond the influence of
individuals
• Individuals entering the business will need several
years of experience to understand how to resolve
ethical issues