Business 223:

Ethics in Commerce
Michael D. Baumtrog
 Today’s Agenda

• Announcements
• Recap of last week
• Chapter 4 – Corporate Culture
• The case of Wells Fargo
• A Note About the Midterm
 Announcements
Reminder: The
• Dedicated Writing Support Academic Integrity
quiz is
Available After Reading MANDATORY!
Week
Complete it on D2L
• Check the Comments on (Assessment → Quizzes)
Your Essay Feedback Only 57 of 88 have it
completed

Presentations: If you don’t have a partner and would like one,

or if you would like to add yourself to the presentation list, come
to the front of the class at break to organize yourselves.
Next: Corporate Culture
Corporate Culture
 Culture
What is culture, generally?
• In groups, briefly discuss:
• What are some of the characteristics of
• University culture? What common
factors are a part of
• Canadian culture? culture in all three?

• Your family’s/friend’s culture?

What, no culture?
 Examples
Milgram Experiment
Milgram Experiement

• Why is it important?
• What does it tell you about culture?
 Examples
• Stanford Prison Experiment

• What are some important differences from

the Milgram Experiment?
• What connections can be made between
these examples and a corporate culture?
Defining Corporate Culture
What is an
“Culture is the social organization’s
glue that helps hold the culture?
organization together...

...by providing “shared pattern of

appropriate standards for beliefs, expectations,
what [members] should and meanings that
influences and guides
say and do.” the thinking and
behaviors of a
•R. Sims, JBE, 1991.
particular group.
p. 110
Corporate Culture includes
things LIKE…
• Tempo of work
• The organization’s approach to humour
• Methods of problem solving
• The competitive environment
• Incentives
• Individual autonomy
• Hierarchical structure
Any organizations famous
for their culture?
• Work in groups using smartphones/laptops
• Investigate the company corresponding to your sector in
the classroom.
• Find information about their culture.
• Provide:
• 1. Brief company overview
• 2. An overview of company culture (just the facts)
• 3. An evaluation: Good, bad, neutral?
 Quiz

Based on Textbook Chapter 4:

pp.109-136 Time left:

Reminders:
Laptops only for the E-Text
No search!

Individual work
Break
What Makes Up Ryerson’s
Culture?
Cultural Context
Procedures, Rules, etc.

students faculty

staff community

Is there a difference between

Ryerson culture and TRSM culture?
Culture & Individuals
Vs.
 Culture & Ethics

Culture Ethics
 How does culture affect
(un)ethical behaviour?
How can corporate culture
make ethical behaviour
more likely?

How can corporate culture

make unethical behaviour
more likely?
2 (Main) Types of Culture

1. Compliance-based
2. Values-based
Compliance-Based Culture
What is a compliance-based culture like?

• Emphasizes obedience to the rules as

the employee’s primary responsibility.
• Usually empowers legal counsel and
audit offices to mandate and to monitor
compliance with the law and with internal
codes
 Values-Based Culture
What is a values-based culture like?

• Also known as “integrity-based”

• Reinforces a particular set of values
rather than a particular set of rules.
• Values & principles work to guide
employee decisions rather than as hard-
and-fast rules.
Why not just compliance?
• A compliance culture is only as strong &
precise as the rules with which workers are
expected to comply.
• You can only have so many rules!
Why?
• Rules can’t cover every situation.

A values-based culture says: when rules are

unclear, we rely on employee integrity.
Recall from a previous discussion…

“Not everyone in your organization

is a lawyer, so don’t focus on law.
Focus on ethics.”
Matthew Tanzer,
VP and Chief Compliance Counsel, Tyco
 The Importance of
Organizational Culture?
A common “Culture wins
saying in the
MANAGEMENT over strategy,
literature… every time.”

What does this

Why is it true?
mean?
 Culture & Leadership
“tone at
the top”
The expert literature on culture is huge…

But two things are certain:

1.Ethics has to come from the top down.
2.Ethics cannot come from the top down.

Let’s not forget the

tone from the need
middle. “buy-in”
What Can Leaders Do to
Promote Ethical Culture?

What’s the difference between

a manager and a leader?
 How does an ethical leader
act?
Ethical methods. Perhaps add: helping
others act ethically.

Ethical objectives.

How?
 Ethical Objectives:

• Mission statement:
• Describes goals, values, and institutional
aim
• Code of Conduct
• Set of behaviour guidelines and
expectations governing all members
 Methods
The three members of the ethics committee are wondering
whether a particular problem requires action.
The test: if two criteria are fulfilled, action needs to be taken.

Ethically Legally Action

Common?
serious? problematic? required?

James yes yes no yes

Gina yes no no no

Rasheed yes no yes yes

Procedures
Majority yes no no ???
matter!
 Measuring Culture
• Determine if employee perception has
changed “if one does not measure
something, people perceive a
• surveys decline in its importance.”
• Independent audit
• Reporting services/mechanisms
• Anonymity and confidentiality
• Rights protection for the accused
 Examples

• Wells Fargo
• Why was it in the news?
 Wells Fargo
First full quarter after the scandal broke:
credit card applications were down 43
percent in the fourth quarter of 2016 Groups of 3 or 4
from a year ago,
new checking account openings fell 40
percent.

An analyst: You have been asked to advise the new CEO in

“For years, Wells has been known as a designing a program to change the culture.
profit-making machine, based in part on
its aggressive sales culture. It was also Question 1: Who are the stakeholders that you
one of the best in the banking industry need to take into account?
at keeping its expenses low. But as its
legal bills pile up and the bank spends Question 2: What are the three most urgent
on advertising to win back skeptical
things that need to change about the culture?
customers, its expenses have also
climbed. The company’s expense ratio
— the bank’s expenses divided by Question 3: What are your first steps in
revenue — climbed to 61 percent. That implementing change?
is outside its typical range.”
 Next Class: Midterm

• 45 Minutes Long
• Covers:
• Chapters 1-4,
• Skepticism
• Lectures
• M.C., T/F, Short Answer