copyright © 2009 pearson education, inc. publishing as prentice hall 8-1 chapter 8 strategic...

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 8-1

Chapter 8Strategic Planning and Corporate

CultureUnderstanding Business Ethics

Stanwick and Stanwick

1st Edition


Ethical Thought

• “In fact, meaningful leadership – leadership that in the long run counts for something – cannot be accompanied by moral collapse. The leader who acts ethically will ultimately succeed. The leader who lacks in ethical foundation will ultimately fail.”– Willard C. Butcher, retired chairman of Chase

Manhattan Corporation


When Ethics Drive a Change in Strategy

• Charles Prince took over as CEO at Citigroup in 2003

• After two years as CEO, he made dramatic changes at the company:– He wanted to improve the form’s corporate

reputation and focus on implementing stronger internal controls and a more comprehensive ethics program



• After initiatives were announced, two of the three highest ranking employees at Citigroup left the company.

• Changes in the value system based on:– Citigroup was accused of not separating its financial

analyst functions from its role as an investment bank– Citigroup had to address government probes in

England for its aggressive strategy related to bond trading

– Citigroup lost its private banking license in Japan – The FTC accused the company of purposely

misleading customers in its consumer lending unit



• Prince described Citigroup from a broad stakeholder perspective – ‘quasipublic institution’

• Prince stated that he spent about one half of his time in the year before his strategic changes were made focusing on culture and values issues


Ethics and Strategic Planning

• Strategic Planning: the process in which future courses of action are developed to achieve the firm’s short and long term goals

• Mirror Test: involves the decision maker’s ability to look in the mirror after decisions have been made and state that he/she made the right choice


Wakenhut’s Core Values

• Customer focus

• Partnership

• Employees

• Professionalism

• Benchmarking

• Innovation and versatility


A Manager’s Ability to Develop Trust, Commitment and Effort

• The ability of managers to effectively identify and answer questions that guide the decision making process:– Moral problems – What is duty?– Moral reasoning – What is right?– Moral courage – What is integrity?

• Net result will be the development of trust, commitment and effort among the firm’s stakeholders


The Role of Power and Influence in Ethical Decisions

• “Power tends to corrupt, and absolute power corrupts absolutely.”– Lord Acton

• “With great power comes great responsibility.”– Uncle Ben Parker reminding Peter Parker

(Spider-Man) of his duties



• Abuse of power can lead to rampant unethical behavior, resulting in the ultimate demise of the organization– examples: WorldCom and Enron

• Using power in an ethical manner:– Power being exercised to benefit others who have

granted the decision maker the power with the expectation that the decision maker will serve others

– Power conforms to both the legal and accepted cultural standards of what is considered to be ethical behavior



• Influence: the ability to change the viewpoint of another person based on your verbal and nonverbal actions

• Manipulation: occurs when the true intentions of the person are hidden and may only be evident after the decision has been implemented


Machiavellianism Approach to Decision Making

• Niccolo Machiavelli published his book, The Prince, in 1532.– Describes how a prince is able to obtain and

maintain his power– Described the perfect leader as one who was

able to manipulate, was bold in his actions and was stealthy when he needed to be.

– “It is better to be feared than to be loved.”


The Curse of Unethical Cultures-Factors that affect whether an employee will commit

fraud• Financial condition of the

organization• Pressure to show profits in the

marketplace• Internal accounting controls• The state of the economy• Integrity level of corporate

leaders and employees• Commitment to the

organization’s value system

• Personal traits and characteristics of executives and employees

• Reward systems for ethical behavior

• Organizational culture and dynamics

• Peer pressure• The perception of detection• The swiftness, certainty, and

severity of punishment


The Responsibility of Managers

• A strong ethical value system can be translated into a competitive advantage – Used by a firm to help differentiate the firm’s

products and services in the marketplace– May help convince potential customers to

purchase goods and services


Addressing Ethical Decision Making from a Global Perspective

• Must understand the unique differences of the companies and countries in which they operate– Is the company capitalist or socialist?– Does the culture align more with the

traditional Western or Eastern culture?– What is the dominate moral philosophy of the

country?– What are the ethical and societal norms of the

country?


Addressing Ethical Decision Making from a Global Perspective

• Egoism: refers to individuals who view decisions based on their self interests.

• Utilitarianism: refers to making decisions that do the greatest good for the greatest number of people.

• Formalism: focuses on ethical issues based on what the laws and norms of society represent instead of the actual content of the laws

• Virtue ethics: refers to individuals who believe that ethical behavior is based on a set of virtues that are morally valid without any consideration to the action or the subsequent outcome.

• Moral relativism: refers to being able to define ethical behavior based on the context of certain peers of the individual


Addressing 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.– Terrorist attacks– Weather related events– Mining accidents

• Crisis Typology– Internal or external crisis – Center of Gravity– Frequency of the issues classified as normal or

abnormal


Ethical Leadership: A Link Between Strategic Planning and Corporate Culture

• Traits: fairly stable and predictable personal characteristics that would remain consistent over time– Integrity– Honesty– Trustworthiness



• Behaviors: must be consistent with what the manager is saying– Do the right thing– Concern for people– Being open– Personal morality



• Decision Making– Hold on to values– Objective/fair– Concern for society– Follow ethical decision rules



• Moral Manager– Transfer of moral value within the moral

manager to those he/she interacts with is based on how the moral manager is able to communicate the ethical values to others

– Should be a role model of ethical behavior – actions become models for subordinates

– All supervisors are not moral persons nor are they moral managers


Moral Persons and Moral Managers

• Unethical Leader– Weak moral person and weal moral managers– Drive to reward their own self-interests

• Ethical Leader– Should be the ultimate ethical goal of any

manager– Ability to use grounded ethical characteristics

and transfer them to others within the organization through the characteristics of a moral manager


Moral Persons and Moral Managers

• Hypocritical Leader– Manager has destroyed all three of the critical traits of

a moral person

• Inconsistent Leader– A manager who has strong ethical traits, behaviors

and decision making of a moral person, but is not able to transfer those values to other employees

– Inconsistent because of the contradictory strength of the individual moral values and weak characteristics of a moral manager


Corporate Culture

• The shared values and beliefs of employees within any given organization

• Based on the norms and behavior patterns

• Can be used by a firm to establish structural stability and integration of different components within the firm


Unethical Activities• False/misleading promises to

customers• Violation of workplace health/safety

rules• Employment discrimination• Violation of employee rights to privacy• Sexual harassment or hostile work

environment• Carelessness with

confidential/proprietary information• Activities posing a conflict of interest• False/misleading information to the

public or media• Unfair competition/antitrust• Substance abuse• Environmental breaches• Offering or paying bribes to foreign

officials

• Falsifying product quality/safety test results

• Offering improper gifts, favors, or entertainment to influence others

• Shipping a product that does not meet quality/safety standards

• Dishonesty/unfair treatment of suppliers

• Falsification/improper manipulation of financial data

• Embezzling funds or stealing from the organization

• Making false/misleading statements to government regulators

• False/misleading information to investors or creditors

• Trading company shares based on insider information

• Improper political contribution to domestic officials


Three Levels Existing with 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; linchpin for the establishment and maintenance of an ethical culture


How Managers Can Change a Corporate Culture

• Primary Embedding Mechanisms

• Secondary Articulation and Reinforcement Mechanisms


How to Change Ethical Values

• Three stage model – ‘cognitive redefinition’:– Stage 1: Unfreezing of the individual’s

existing beliefs– Stage 2: Occurs when the beliefs have been

unfrozen and the perceptions and attitudes of the individual are allowed to move to a new state

– Stage 3: The refreezing takes place


Changing Corporate Culture

• Management’s Responsibility:– Verify that ethical decisions are made by all levels of

employees– Develop an organization culture that supports the

ethical decision making process

• Formalizing a culture of ethics:– Define your philosophy and corporate values in a

mission statement– Develop guidelines for employees– Establish a formal channel for employees to report

violations


Evaluation of Corporate Culture

• Cultural Assessment of the firm – Deloitte & Touche recommend asking:– Do rank and file employees understand the tone set by senior

management?– Do you know, without a doubt, that your organization’s culture

encourages ethical behavior at all levels?– Can employees throughout your organization describe the

company’s 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?


Creating a Climate of Integrity

• Set an example through strong leadership

• Set realistic goals

• Provide training

• Distinguish between compliance and ethics


Key Attributes of a Fully Integrity Based Organization

• Employees feeling a sense of responsibility and accountability for their actions and the actions of others

• Employees freely raising issues and concerns without fear of retaliation

• Managers modeling the behaviors they demand of others

• Managers communicating the importance of integrity when making difficulty decisions

• Leadership understanding the pressure points that drive unethical behavior

• Leadership developing processes to identify and remedy the areas where the pressure points occur


Questions for Thought

1. Identify and explain a situation where you have seen Machiavelli’s framework at work.

2. Why do leaders say there is no middle ground when referring to ethical behaviors?

3. Explain why ethical decision making is so important in the strategic planning process.

4. Explain corporate culture in light of ethical conduct.


All rights reserved. No part of this publication may be reproduced, stored in a retrieval system,

or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of

America.

copyright © 2009 pearson education, inc. publishing as prentice hall 8-1 chapter 8 strategic...

Documents