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CHAPTER 2
MANAGING IN A CULTURAL AND ETHICAL
ENVIRONMENT
CHAPTER OBJECTIVES
After studying this chapter and the case exercises at the end, students should be able to:
1. Correctly identify both ethical and unethical decisions.
2. Rate your own ethics level.
3. Assess and quantify the ethical culture of an organization.
4. Design a specific plan for improving ethical behavior in a company.
5. Specify the steps a manager should take to change a company’s ethical culture.
6. Design a specific diversity management plan.
LECTURE OUTLINE
The Management Challenge
Introduction
What is Ethical Behavior?
The Meaning of Ethics
Good and Evil
Ethics and the Law
What Influences Ethical Behavior at Work?
Individual Factors
Organizational Factors
The Influence of Top Management
Ethics Policies and Codes
How to Foster Ethics at Work?
Activities that Foster Ethics
Using Technology to Foster Ethics
Creating the Right Culture
What is Organizational Culture?
Ethics and Corporate Culture
Culture and the Manager
Managers and Social Responsibility
Ethics and Social Responsibility
Why Are Companies Socially Responsible?
How to Improve the Company’s Social Responsiveness
Managing Diversity
Boosting Performance by Managing Diversity
Bases for Diversity
Barriers in Dealing with Diversity
How to Manage Diversity Successfully
Summary
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ANNOTATED OUTLINE
NOTES
The Management Challenge
John Pepper, chairman of Procter & Gamble, discovered that his
company gathered competitive information about Unilever through
means that violated P&G’s competitive business information
gathering policy.
What is Ethical Behavior?
The Meaning of Ethics
Ethics refers to the principles of conduct that govern an individual
or a group. Normative judgment refers to something being good
or bad, right or wrong, or better or worse. Morality deals with
society’s accepted ways of behavior.
Good and Evil
For philosophers, the study of ethics is the study of good and evil.
Some believe that good and evil are “relative to the conditions of
the time and place.” Philosophers have names for these types of
views. Teleologist—evaluates good or evil and right or wrong
based on the consequences or results of the proposed actions.
Deontologist—evaluates whether actions are good or bad, right or
wrong based on “whether or not they conform to certain principles
you feel bound to obey or follow regardless of their
consequences.” Some views fall in between these two extremes,
like utilitariansim.
Ethics and the Law
The law determines whether something is legal or illegal. A legal
decision can be ethical or unethical.
Figure 2-1
The Wall Street Journal
Workplace-Ethics Quiz
Table 2-1
A Comparison of Several
Moral Philosophies
Figure 2-2
The Ethical Continuum
What Influences Ethical Behavior at Work?
Individual Factors
Individuals have their own ideas about what is morally right or
wrong, which determines whether their decisions will be ethical or
unethical.
Organizational Factors
The values, attitudes, beliefs, language, and behavioral patterns
of an organization define its operating culture and ethics.
The Influence of Top Management
The behavior of top management is an important factor that
influences ethical decisions.
Ethics Policies and Codes
Many organizations have ethics policies and codes. Having a
code of ethics will be even more important in the future due to
increased diversity in the workforce.
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Figure 2-3
How Do My Ethics Rate?
Table 2-2
Principal Causes of
Ethical Compromises
How to Foster Ethics at Work
Activities That Foster Ethics
The five main steps to fostering an ethical environment at work
are 1) emphasize top management’s commitment, 2) publish a
“code,” 3) establish compliance mechanisms, 4) involve personnel
at all levels, and 5) measure results.
Table 2-3
Code of Ethics
Implementation
Checklist 2.1
How to Foster Ethics
Figure 2-4
The Role of Training in
Ethics
Management in Action
Raytheon
Using Technology to Foster Ethics
Technology provides a mean for monitoring potentially unethical
actions.
Managing at the Speed of Thought
BellSouth and Lockheed Martin
Creating the Right Culture
What is Organizational Culture?
Organizational culture is defined as the characteristic traditions
and values shared by the employees of an organization. Cultural
artifacts are the obvious signs and symbols, such as written rules,
dress codes, organizational structure, of a company’s culture.
Patterns of behavior, values, and beliefs are also a part of
organizational culture.
Ethics and Corporate Culture
The company’s culture influences its ethics, and the manager’s
ethics influence the culture.
Table 2-4
Organizational Culture
Ethics Audit
Culture and the Manager
Managers influence organizational culture by clarifying
expectations, using signs and symbols, providing physical
support, using stories, and organizing rites and ceremonies.
Checklist 2.2
How to Create the
Corporate Culture
Management in Action
Corporate Culture at Procter & Gamble
Manager’s and Social Responsibility
Corporate social responsibility refers to the extent to which
companies should and do channel resources toward improving
one or more segments of society other than the firm’s owners or
stockholders.
Ethics and Social Responsibility
Ethics is the bedrock of socially responsible behavior. The
question then becomes “To whom should the corporation be
responsible?” The answer depends on what you believe to be the
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purpose of business. Managerial Capitalism—classic view that a
corporation’s main purpose is the maximize profits for
stockholders. Stakeholder Theory—opposing view that business
has a social responsibility to serve all the corporate stakeholders
affected by its business decisions. Moral Minimum—the purpose
of the corporation is the maximize profits, but it must do so in
conformity with the moral minimum.
Why Are Companies Socially Responsible?
The lengths to which the manager goes to be socially responsible
depends on several things. Person’s philosophy—views about the
purpose of business. Social responsibility is also aided by the
eyes of outside monitors and pressure groups.
Figure 2-5
A Corporation’s Major
Stakeholders
Figure 2-6
Top-Rated Companies
for Social Responsibility
How to Improve the Company’s Social Responsiveness
Managers improve their companies’ social responsiveness by
instituting policies and practices that encourage socially
responsible behavior.
These include social audits, whistleblowing, and joining socially responsible networks.
Managing Diversity
Managing diversity means planning and implementing
organizational systems and practices to manage people so that
the potential advantages of diversity are maximized while its
potential disadvantages are minimized.
Boosting Performance by Managing Diversity
Managers are striving for racial, ethnic, and sexual workplace
balance as a matter of economic self-interest. A study found that
cultural diversity contributes to improved productivity, return on
equity, and market performance.
Bases for Diversity
A workforce is diverse when it is composed of two or more groups,
each of whose members are identifiable and distinguishable
based on demographic or characteristics, such as: racial and ethic
groups, gender, older workers, people with disabilities,
sexual/affectional orientation, and religion.
Barriers in Dealing with Diversity
Several barriers in dealing with diversity include stereotyping,
prejudice, ethnocentrism, discrimination, tokenism, and genderrole stereotypes.
How to Manage Diversity Successfully
Managing diversity means taking steps to maximize diversity’s
potential advantages while minimizing possible barriers. Steps to
take: provide strong leadership, assess your situation regularly,
provide diversity training and education, change the culture and
management systems, and evaluate the diversity program.
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Checklist 2.3
How to Manage Diversity
Figure 2-7
Activities Required to
Better Manage Diversity
Summary
1. Managers face ethical choices every day. Ethics refers to the principles of conduct governing
an individual or a group. Ethical decisions always include both normative and moral judgments.
2. Being legal and being ethical are not necessarily the same thing. A decision can be legal but
still unethical, or ethical but still illegal.
3. Several factors influence whether specific people in specific organizations make ethical or
unethical decisions. The individual making the decision must ultimately shoulder most of the
credit (or blame) for any decision he or she makes. However, the organization itself—including
its leadership, culture, and incentive/compensation plan—also shapes an individual employee’s
behavior.
4. Ethics policies and codes send a strong signal that top management is serious about ethics,
and are a sign that the company wants to foster a culture that takes ethics seriously.
5. Managers can take several steps to foster ethics at work: They can emphasize top
management’s commitment, publish a code, establish compliance mechanisms, involve
personnel at all levels, and measure results.
6. Organizational culture may be defined as the characteristic, values, traditions, and behaviors
employees share. Values are basic beliefs about what you should or shouldn’t do and what is
and is not important.
7. Several things contribute to creating and sustaining the corporate culture. One is a formal
values statement. Leaders also play a role in creating and sustaining culture. One of a leader’s
most important functions is to influence the culture and shared values of an organization.
Managers also use signs and symbols, stories, and rites and ceremonies to create and sustain
their companies’ cultures.
8. Social responsibility is largely an ethical issue, since it involves questions of what is morally
right or wrong with regard to the firm’s responsibilities. People differ in their answer to the
question, To whom should the corporation be responsible? Some say solely to stockholders,
and some say to all stakeholders. Some take an intermediate position: They agree that the
purpose of the corporation is to maximize profits, but subject to the requirement that it must do
so in conformity with the moral minimum.
9. As the workforce becomes more diverse, it becomes more important to manage diversity so
that the benefits outweigh any potential drawbacks. Potential barriers to managing diversity
include stereotyping, prejudice, ethnocentrism, discrimination, and tokenism. Managing diversity
involves taking steps such as providing strong leadership, assessing the situation, providing
training and education, changing the culture and systems, and evaluating the program.
KEY TERMS
ethics 28
normative judgment 28
morality 28
organizational culture 38
patterns of behavior 38
values and beliefs 38
signs and symbols 39
stories 40
rites and ceremonies 40
social responsibility 41
corporate stakeholder 42
moral minimum 42
corporate social audit 44
whistle-blowing 45
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managing diversity 45
diverse 46
stereotyping 46
prejudice 46
ethnocentrism 46
discrimination 46
tokenism 47
gender-role stereotype 47
mentoring 48
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