8/9/2015

Lesson 3a

Ethics and
Corporate Culture

2015 Andrew Lee. All rights reserved.

What is meant by Corporate Culture?

1. A shared pattern of beliefs, expectations and meanings (that are
characteristic of, and) that influence and guide the thinking and behaviors
of the members of, an organization Hartman et al.
2. A set of core values describing the essential and enduring tenets that
help to define an organization and are not to be compromised for
financial gain or short-term expediency Jim Collins, Build to Last:
Successful Habits of Visionary Companies.
3. Members of an organization are influenced by, and also influence, the
corporate culture of their organization.

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Role of Corporate Culture in Business Ethics

1. Ethical corporate cultures encourage and support their staff (members)
in making ethically responsible decisions. (Converse is true too!)
2. Compliance-based cultures vs. Values-based cultures
Compliance-based emphasises obedience to the rules
But rules can never anticipated every conceivable situation
Values-based reinforces a set of values rather than rules
Must rely on personal integrity of staff
3. Does an ethical corporate culture pay?
Companies on Ethisphere Institutes Worlds Most Ethical Companies have
stock returns that outperformed S&P500 by 7.3% from 2007-12.

Ethical Leadership and Corporate Culture

1. Primary responsibility of corporate leadership to steward an ethical
corporate culture.
2. Tone at the top
Tone has to be consistent and credible does it walk the talk? or is it just
grandstanding?
Does the leader have an ethical mind? Integrity?
Corporate resources has to be allocated to support and promote ethical
behavior (including ethics training/awareness programs)
3. Ethical leader not the same as effective leader
Apply OTooles Executives Compass
Can a leader of an unethical business ever be ethical?

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James OToole: The Executives Compass

LIBERTY
(Libertarianism)

COMMUNITY EFFICIENCY
(Communitarianism) vs. (Corporatism)

EQUALITY
(Egalitarianism)

Role of an Ethical Code of Conduct

1. Articulation of the organizations values
Creates and maintains awareness. Useful reminder.
2. Writing an effective code
Be clear about the objectives of the code.
Ensure it does not violate laws and regulations.
Keep it short and simple. Avoid legal jargon and empty generalities.
3. A code is only a tool
An ethical code is written, not on the hallways, but in the hearts.

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It takes 20 years to build a reputation

and 5 minutes to ruin it.

Warren Buffett

Youre looking for three things, generally, in a person

intelligence, energy, and integrity. And if they dont have
the last one, dont even bother with the first two .

Warren Buffett

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Rule #1: The customer is always right.

Rule #2: If the customer is wrong, go back to Rule #1.
Stewart Leonard Sr., Founded U.S. grocer chain Stew Leonards in 1969.
Management guru Tom Peters once crowned Leonard as the king of customer service.

Lesson 3b

Ethics in the
Workplace.
Whistle-blowing.

2015 Andrew Lee. All rights reserved.

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Ethics in the Workplace

1. Health and safety in the workplace Employer:
2. Discrimination You choose to work here.
3. Termination of employment So why complain?
Due process and just cause
Layoffs The other side of the argument:
Job-hopping No voice
4. Child labor No choice
5. Privacy Basic human rights
Health testing and probity checks Misrepresentation
Use of technology to monitor staff

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Whistle-blowing
1. Definition
Release of information by a member or former member of an
organization that is evidence of illegal and/or immoral conduct in the
organization, and which is not in the public interest.
2. Ingredients of whistle-blowing
By member or former member (i.e. insider) of the organization not
external witness, journalist/reporter, appointed auditor/investigator
Involves non-public information
Involves significant illegality or misconduct in the organization
Is done voluntarily and not required by law

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Whistle-blowing Is it justified?
1. Motive must be to correct some wrong, and not to seek vengeance or personal
advancement
2. The Loyal Agent argument
Employees are agents of their employer
To be loyal and faithful. To act in the interest of the employer.
To protect confidentiality of information.
But not to do illegal or immoral acts, even if instructed.
3. The Freedom-of-Speech argument
Unfettered freedom, or responsible freedom?
4. Trade-offs
Negative Open to abuse. Whistle-blowers penalised and suffer retaliation.
Positive Harm to wider community (organization, society, profession) if not disclosed

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Whistle-blowing Is it justified? (Boatright)

1. Not to be done without adequate justification, nor something that can never be
justified.
2. Conditions where whistle-blowing is justified:
Situation is of sufficient moral importance how serious is the potential harm?
Whistle-blower has factual evidence and properly understood their significance
All other internal channels have been exhausted
Role of the whistle-blower in the organization how related is the issue?
How to blow the whistle?
Anonymous?
How much information should be revealed?
High chance of success i.e. of achieving good
But this is very subjective and utilitarian. Organization may be too powerful.

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Whistle-blowing Policy
Ingredients of an effective whistle-blowing policy (Boatright):
An effectively communicated statement of responsibility
A clearly defined procedure for reporting
Well-trained (and sufficiently senior) personnel to receive and
investigate reports
A commitment to take appropriate action
Assurance that reporting is not ignored or misused
Reporting staff is informed of outcome of investigation and action taken
A guarantee against retaliation
Credible commitment to the policys success by top management

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Lesson 3c

Greg Smith &

Goldman Sachs

2015 Andrew Lee. All rights reserved.