Chapter 6

Strategic Planning, Corporate

Culture and Corporate
Compliance
Understanding Business Ethics
Stanwick and Stanwick
2nd Edition

Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

When Ethics Drive a Change in

Strategy
In 2003, Charles Prince took over as CEO
at Citigroup
He stated that one of his primary goals
was to improve the firms corporate
reputation and to focus on implementing
stronger internal controls and a more
comprehensive ethics program at the
company
Prince described Citigroup from a broader
stakeholder perspective by styling the
company as a quasipublic institution
Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

Ethics and Strategic

Planning

Strategic Planning is the process in

which future courses of action are
developed to achieve the firms short
and long-term goals

Five questions to ask before

making a final decision
1.
2.
3.
4.
5.

Why is this bothering me?

Is it my responsibility?
What is the ethical concern?
What do others think?
Am I being true to myself?

Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

Ethics and Strategic

Planning

Mirror Test

involves the decision makers

ability to look in the mirror after
decisions have been made and
state that he/she made the right
choice

The mirror test applies to the

questions Am I being true to
myself?
Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

The Ethical Cycle

Stages of the Ethical Cycle
Moral problem statement
Problem analysis
Options for actions
Ethical judgment
Reflection

Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

The Ethical Cycle

Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

Using Strategic Ethical Decisions

to Build Character
The Ethical Cycle helps employees
understand who they are from an
ethical perspective.
A defining moment is when a decision
maker has a choice between two
plausible and acceptable strategic
options.
Who am I?
Who are we?
Who is the company?
Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

Wakenhuts Core Values

1.
2.
3.
4.
5.
6.

Customer focus
Partnership
Employees
Professionalism
Benchmarking
Innovation and versatility

Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

How to Address Ethical Crisis and

Disaster Recovery
An ethical crisis occurs when a
event that was not part of the
normal course of action takes place
and has an impact on the firm.
Crisis Typology Dimensions
1. Whether issues is internal or external
called Center of Gravity
2. Frequency of the issues classified as
normal or abnormal

Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

Corporate Culture
Defined as the shared values
and beliefs of employees within
any given organization
Must have strong ethical focus
to ensure that unethical
activities do not take place in
the workplace

Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

Three Levels of Corporate

Culture
Artifacts
Factors such as what is seen and
heard within a firm

Shared Values
Based on what groups within the
firm learn about what is
acceptable or not acceptable

Basic Assumptions
The agreed starting point for
decision making within the firm
Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

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How Managers Can Change a

Corporate Culture
Two types of mechanisms in
which managers can change
cultures
1. Primary Embedding Mechanisms
2. Secondary Articulation and
Reinforcement Mechanisms

Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

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How to Change Ethical

Values

12

Three stage model of change

Stage 1 (unfreezing) unfreezing of

the individuals existing beliefs
Stage 2 (moving) - top
management needs to ensure that
what is considered acceptable and
unacceptable is clear
Stage 3 (refreezing) top
managers must reinforce their
commitment to support strong ethical
behavior
Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

Formalizing a Culture of
Ethics
Culture should include three
basic components
1. Define your philosophy and
corporate values in a mission
statement
2. Develop guidelines for
employees
3. Establish a formal channel for
employees to report violations

Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

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Evaluation of Corporate
Deloitte & ToucheCulture
Cultural Assessment of a
Firm

Do rank and file employees understand the tone set

by senior management?
Do you know that your organizations culture
encourages ethical behavior at all levels?
Can employees throughout your organization
describe the companys code of ethics?
Do employees in all areas of your organization ask
questions and express concerns?
Do your employees believe that the mechanisms are
in place to allow them to voice opinions without fear
of retribution?

Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

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Creating a Climate of
Integrity
Suggestions:
1. Set an example through strong
leadership
2. Set realistic goals
3. Provide training
4. Distinguish between compliance
and ethics

Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

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Ethics and Corporate

Compliance
Deloitte & Touche Five Step Process to
embed positive ethics and values
Step 1 Conduct risk/cultural assessment
Step 2 Review current compliance
program
Step 3 Review ethical policies and
procedures
Step 4 - Review and revise the
communication, training, and
implementation phases of program
Step 5 Develop an ongoing assessment
of the program
Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

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The U.S. Federal Sentencing

Guidelines for Organizations
Guidelines were passed in 1991
and revised in 2004
Guidelines stage that
organizations can be charged
with and convicted of federal
crimes
Organizations can be fined,
sentenced to probation for up to
five years, and ordered to pay
restitution to their victims
Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

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Common Criminal Charges

from Federal Sentencing
Guidelines
Ranked in order of frequency
1.
2.
3.
4.
5.

Fraud
Environmental waste discharge
Violations of taxation
Antitrust violations
Food and drug criminal violations

Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

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Corporate Compliance Systems

and Global Corruption
Corruption
Defined as the conscious abuse of
public roles and resources for the
private benefit of a firm and/or the
individuals of the firm
Bribery
Extortion
Embezzlement

Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

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20

Corruption Classifications
Petty Corruption
Grand Corruption
Influence Peddling
Transparency International
A global civil society organization
whose mission is to try to reduce
corruption around the world
Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

The U.S. Foreign Corrupt

Practices Act
Passed into law in 1977 and
amended in 1988
Prohibits any U.S. firm and its
foreign subsidiaries from giving
foreign government officials
any financial incentives in
exchange for either obtaining
or retaining any government
business in that country
Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

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The U.S. Foreign Corrupt

Practices Act
Includes both United States
based firms and domestic
concerns and individuals
Criminal penalties for violation
can be up to $2 million for a
firm and $100,000 and five
years in prison for an
individual
Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

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Questions for Thought

1. In the opening vignette, why do you
think it was important for Sanford Weill
to stay on as Chairman of the Board
after Charles Prince was picked as the
new CEO? Why did three top level
employees at Citigroup want to leave
after two years with Prince as CEO?
Why do you think there were multiple
ethical problems at Citigroup when
Prince took over as CEO?
2. Explain why ethical decision making is
so important.
Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.

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24

Questions for Thought

3. Explain corporate culture in light of
ethical conduct.
4. Examine the compliance program
of a publicly held company. Do
they have a mission statement
related to ethics? Comment on the
program.

Understanding Business Ethics 2nd Edition 2014 SAGE Publications, Inc.