Corporate Culture: One way to curb unethical behavior

1. Corporate Culture: One way to curb unethical behavior

2. Corporate culture A blend of ideas, customs, traditional practices, organizational values and shared meanings that help define normal behavior for everyone who works in a company

3. “The accepted way of thinking, feeling, and acting in an organization” • “Shared beliefs about what is important and how things are done” • “Social glue that binds members of the organization together through shared values, symbolic devices, and shared ideals”

7. Artifacts: What can you see & hear? • Symbols • Slogans/mottos/credos • Rituals • Stories • Dress code • Layout of space • Technology used • Observable

8. Espoused values: How the organization wants to operate • Rules/regulations • Policies • Code of conduct • Strategies • Goals • Philosophies • Ethical climate: The unspoken understanding among employees of what is and is not acceptable behavior. • Somewhat observable

9. Assumptions and beliefs: Taken for granted • Beliefs • Perceptions • Thoughts • Feelings • Not observable

10. Functions of Organizational Culture • Behaviorial control • Establishes Organizational Identity • Fosters Commitment • Promotes Stability • Expectations (norms and rules) and what to anticipate and how to behave

11. Types of culture • Strong • Weak

12. Foundation of a strong culture? • Ethical leaders! • “In thought, word and deed, a company’s leaders must clearly and unambiguously both advocate and model ethical behavior.” -CEO, Merck • What are the traits of an ethical leader? • Difference between good and ethical

14. We can’t assume everyone will be ethical all of the the time so… sometimes you have to regulate.

16. Sarbanes-Oxley Act 2002 • A Public Company Accounting Oversight Board is established. • The firms are not permitted to offer loans to its executive officers or board of directors. • SEC rules will create guidelines for internal controls and financial reporting procedures. • ERISA penalties are increased from $5,000 to $100,000 and one year in prison to $100,000 to $500,000 and up to 10 years in prison.

17. Sarbanes-Oxley Act 2002 • The firm’saudit committee is entrusted with auditor oversight and with all independent directors on the committee • Certain nonaudit services by auditors to clients are banned, nonaudit services must be preapproved by the audit committee, the lead auditor must be rotated every five years, and auditors report to the audit committee. • The CEO and CFO must sign off on financial statements as accurate and fair and must repay bonuses if a restatement of financials is undertaken.

18. U.S Corporate Sentencing Guidelines: Directives • Establish standards and procedures to reduce criminal conduct • Assign high-level officer(s) responsibility for compliance • Not assign discretionary authority to “risky”individuals • Effectively communicate standards and procedures through training • Take reasonable steps to ensure compliance-monitor and audit systems, maintain and publicize reporting systems • Enforce standards and procedures through disciplinary mechanisms • Following direction of offense, respond appropriately and prevent reoccurrence Effectively communicate standards and procedures through training Take reasonable steps to ensure compliance-monitor and audit systems, maintain and publicize reporting systems

19. In order to comply… • Codes of ethics exist in each of your chosen fields • Accounting • Finance • Marketing • Information Technology

20. Creating a culture of ethical leaders • Creating/enforcing codes of ethics • Print, post, pray • Ethics committees • Ethics officers/ombudspersons • Hot lines • Ethics audits • Corporate ethics awards

21. Ethics Training • Ethics training videos • The Office

22. Next class • Stakeholder Theory