Chapter 04 The Corporate Culture—Impact and Implications

True / False Questions

1.(p. 145) Due to diverse employee groups and management styles, the work culture of a large global firm in one country will differ significantly from the work culture of the same firm halfway around the world.FALSE

Despite the fact that corporations have many locations, with diverse employee groups and management styles, an individual working for a large global firm in one country will share various aspects of her or his working culture with someone working for the same firm halfway around the world.

2.(p. 146) Corporate culture shapes, and is shaped, by the people who are members of the organization.TRUE

While culture shapes the people who are members of the organization, it is also shaped by the people who comprise it.

3.(p. 148) Differing individual perception of culture makes it easier to define the specific culture within an organization.FALSE

Defining the specific culture within an organization is not an easy task since it is partially based on each participant's perception of the culture.

4.(p. 149) In situations where an organization lacks strong leadership for ethical decision making despite the clarity of law, the business culture is likely to be the determining factor in the decision.

FALSE

In situations where the law provides an incomplete answer for ethical decision making, the business culture is likely to be the determining factor in the decision.

5.(p. 151) Organizations with similar missions, rules, and legal regulations, can have significantly different cultures.TRUE

According to the examples of FEMA and the Coast Guard provided in the text, it is fair to say that FEMA and the Coast Guard are two very similar organizations with similar missions, rules, and legal regulations; but they have significantly different cultures.

6.(p. 152) Organizations that have a traditional approach to culture can be classified ascompliance-based cultures.TRUE

In the 1990s, a distinction came to be recognized in types of corporate culture: some firms were classified as compliance-based cultures (the traditional approach) while others were considered to be values-based or integrity-based cultures.

7.(p. 153) A values-based culture recognizes that where rules do not apply, the firm must rely on the personal integrity of its workforce during decision-making.TRUE

A values-based culture recognizes that where a rule does not apply the firm must rely on the personal integrity of its workforce when decisions need to be made.

8.(p. 155) Ethics is held as a priority if the general counsel serves as the ethics officer in her "spare time," even if no additional resources are allocated to that activity.FALSE

Ethics was not a priority if the general counsel served as the ethics officer in her "spare time," and no additional resources were allocated to that activity.

9.(p. 157) "Quietly ethical" executives within the confines of the top management team are likely to be perceived as ethical leaders because they have the support of the top management.

FALSE

If an executive is "quietly ethical" within the confines of the top management team, but more distant employees do not know about her or his ethical stance, they are not likely to be perceived as an ethical leader.

10.(p. 158) An appropriate method of leadership is insufficient to establish a leader as being ethical.TRUE

Certainly ethically appropriate methods of leadership are central to becoming an ethical leader. But while some means may be ethically better than others (e.g., persuasion rather than coercion), it is not the method alone that establishes a leader as ethical.

11.(p. 161) In the absence of other values denoted by a code of conduct within an organization, the only value becomes profit—at any cost.TRUE

Before impacting the culture through a code of conduct or statement of values, a firm must first determine its mission so that decision makers have direction when determining dilemmas. In the absence of other values, the only value is profit—at any cost.

12.(p. 162) In the development of guiding principles for the firm, articulation of a clear vision regarding the firm's direction is a step that precedes the step of asking yourself what you stand for or what the company stands for.FALSE

In the development of guiding principles for the firm, it is critical to first ask yourself what you stand for or what the company stands for. The second step is the articulation of a clear vision regarding the firm's direction.

13.(p. 163) One of the most determinative elements of integration is communication.TRUE

One of the most determinative elements of integration is communication because without it there is no clarity of purpose, priorities, or process.

14.(p. 165) Whistleblowing to external groups is usually preferred over internal mechanisms for reporting wrongdoing.FALSE

Because whistleblowing to external groups, such as the press and the legal authorities, can be so harmful to both the whistleblower and to the firm itself, internal mechanisms for reporting wrongdoing are preferable for all concerned.

15.(p. 167) Lack of any generally accepted fundamental values for the organization is a clear sign of a "toxic" culture.TRUE

The first clear sign of a "toxic" culture would be a lack of any generally accepted fundamental values for the organization.

16.(p. 169) The United States Sentencing Commission is an independent agency that regulates sentencing policies in the federal court system.TRUE

The United States Sentencing Commission (USSC), an independent agency in the United States Judiciary, was created in 1984 to regulate sentencing policy in the federal court system.

Multiple Choice Questions

17.(p. 145) Which of the following is true about corporate culture?A.Corporate cultures shape the people of the organization, without getting affected by them.B.Corporate cultures are generally static, but can be changed by voluntary action of the top managers.C.Corporate cultures can hinder individuals in making the "right" decisions.D.In large global firms, corporate cultures differ significantly for two firms located in different countries.

Individuals can be helped—or hindered—in making the "right" or "wrong" decision (according to their own values) by the expectations, values and structure of the organization in which they live and work.

18.(p. 146) Which of the following statements is incorrect about corporate culture? A.   One strong business leader is not enough to have an impact on corporate culture.B.Even in decentralized corporations, there is a sense of culture in organizations.C.Businesses have unspoken yet influential standards and expectations.D.Corporate culture is always changing.

Organizational cultures are a bit like moving an iceberg. One person cannot alter its course alone; but strong leaders—sometimes from within, but often at the top—can have a significant impact on a culture. A strong business leader can certainly have a significant impact on a corporate culture.

19.(p. 148) Defining the specific culture within an organization is a difficult task. Which of the following is a factor that is partially responsible for this difficulty and impacts the organizational culture in a circular way?A.Method for feedbackB.Openness in communicationC.Transparency of operationD.Perception of participants

Defining the specific culture within an organization is not an easy task since it is partially based on each participant's perception of the culture. In fact, perception may actually impact the culture in a circular way—a culture exists, we perceive it to be a certain type of culture, we respond to the culture on the basis of our perception, and we thereby impact others' experience of the culture.

20.(p. 149) Which of the following situations could result in the business culture becoming a determining factor in ethical decision-making?A. Lack of adequate judgmentB.   Laws being ambiguousC.Lack of strong leadershipD.Stagnant or decreasing profits

In situations where the law provides an incomplete answer for ethical decision making, the business culture is likely to be the determining factor in the decision.

21.(p. 151) The comparison between the Federal Emergency Management Agency (FEMA) and the United States Coast Guard shows:A.the efficiency levels within federal bodies.B.the inequity encountered in all professional organizations.

C.that decisions need to be made to benefit the stakeholders.D.   that similar missions, legal regulations, and rules do not translate into similar cultures.

It is fair to say that FEMA and the Coast Guard are two very similar organizations with similar missions, rules, and legal regulations, but with very different cultures. The decisions made throughout both organizations reflect the culture of each.

22.(p. 152) Which of the following statements is true about ethical corporate cultures? A.Ethical organizational culture cannot have a direct impact on the bottom line.B.   If attended to and supported, a strong ethical culture can serve as a deterrent to stakeholder damage.C.Even if ignored, organizational culture could reinforce a perception that "anything goes," and "any way to a better bottom line is acceptable," building long-term sustainability.D.The responsibility for creating and sustaining ethical corporate cultures rests on law enforcement agencies.

If attended to and supported, a strong ethical culture can serve as a deterrent to stakeholder damage and improve bottom line sustainability.

23.(p. 152) Which of the following approaches to culture is traditional?A.Values-basedB.Integrity-basedC.Customer-basedD.Compliance-based

In the 1990s, a distinction came to be recognized in types of corporate culture: some firms were classified as compliance-based cultures (the traditional approach) while others were considered to be values-based or integrity-based cultures.

24.(p. 152-153) The distinction between compliance-based and integrity-based cultures is most evident in:A.marketing and economics.B.business administration and law.C.accounting and auditing.D.training and sales.

The distinction between compliance-based and values-based cultures perhaps is most evident in accounting and auditing situations; but it can also be used more generally to understand wider corporate cultures.

25.(p. 153) Which of the following cultures will empower legal counsel and audit offices to mandate and to monitor conformity with the law and with internal codes?A.Customer-based cultureB.Integrity-based cultureC.Values-based cultureD.   Compliance-based culture

A compliance-based culture will empower legal counsel and audit offices to mandate and to monitor compliance with the law and with internal codes.

26.(p. 153) Which of the following is true about corporate culture?A. An integrity-based culture is one that reinforces a particular set of rules.B.   A compliance culture is only as strong and as precise as the rules that workers are expected to follow.C.Values-based organizations do not include a compliance structure.D.A values-based culture emphasizes obedience to the rules as the primary responsibility of ethics.

The argument in favor of a values-based culture is that a compliance culture is only as strong and as precise as the rules with which workers are expected to comply.

27.(p. 153) When would a values-based organization rely on the personal integrity of its workforce when decisions need to be made?A.   In a situation where rules do not apply.B.In a crisis situation where the leader is absent.C.In a situation where the goal is to change the organizational culture drastically.D.In a situation where immediate decision is required.

A values-based culture recognizes that where a rule does not apply the firm must rely on the personal integrity of its workforce when decisions need to be made.

28.(p. 153) Which of the following is a feature of an evolved and inclusive ethics program, as opposed to a traditional compliance-oriented program?A. Meeting regulatory requirements

B.   Helping to unify a firm's global operationsC.Minimizing risks of litigation and indictmentD.Improving accountability mechanisms

The goals of a more evolved and inclusive ethics program may entail a broader and more expansive application to the firm, including maintaining brand and reputation, recruiting and retaining desirable employees, helping to unify a firm's global operations, creating a better working environment for employees, and doing the right thing in addition to doing things right.

29.(p. 155) Which of the following statements about ethics and ethics officers is correct?A.Ethics officers were first introduced to the corporate structure in the early 1980s.B.Ethics is not taken seriously if an individual is hired into an exclusive position as ethics officer.

C.Ethics is taken as a priority even if no additional resources are allocated to that activity.D.Ethics was not a priority if the general counsel served as the ethics officer in her "spare time."

Ethics was not a priority if the general counsel served as the ethics officer in her "spare time," and no additional resources were allocated to that activity.

30.(p. 157) Identify the correct statement about ethical leaders.A.Individuals perceived as ethical leaders avoid doing things that "traditional leaders" do.B.A "quietly ethical" executive is likely to be perceived as an ethical leader.C.   An ethical leaders' traits and behaviors must be socially visible.D. People perceive that the ethical leader's goal is consistent job performance by being "quietly ethical."

An ethical leader's traits and behaviors must be socially visible and understood in order to be noticed and influence perceptions.

31.(p. 158) In the corporate context, Enron executives Ken Lay and Jeffrey Skilling were:A.effective and ethical leaders.B.ineffective and unethical leaders.C.effective but unethical leaders.D.ineffective but ethical leaders.

In the corporate context, Enron executives Ken Lay and Jeffrey Skilling were successful, effective business leaders. They were also unethical leaders.

32.(p. 158) The means used to motivate others and achieve one's goals plays a key role in distinguishing between:A. silent leaders and visible leaders. B.effective leaders and ethical leaders.C.informal leaders and formal leaders.D.silent leaders and ethical leaders.

One key difference between effective leaders and ethical leaders lies with the means used to motivate others and achieve one's goals.

33.(p. 158) Ethically appropriate methods of leadership alone are insufficient for establishing ethical leadership. Identify the other element.A.   The ends or objective towards which the leader leads.B.The prevailing culture in the external environment.C.The ethical nature of the team members.D.The personality traits of the team members.

While some means may be ethically more appropriate than others (e.g., persuasion rather than coercion), it is not the method alone that establishes a leader as ethical. The other element of ethical leadership involves the end or objective towards which the leader leads.

34.(p. 159) If we judge a leader solely by the results produced, we are following the ethical tradition of:A.deontological ethics.B.virtual ethics.C.classicism.D.   utilitarianism.

If we judge a leader solely by the results produced—the utilitarian greatest good for the greatestnumber—we may ignore the mistreatment of workers that was necessary to achieve that end.

35.(p. 161) Which of the following is usually the only "value" in an organization in the absence of any other established values?A.   Profit-at any costB.Ethical behaviorC.Legal compliance even when laws are ambiguousD.Customer satisfaction

In the absence of values in an organization, the only value is profit—at any cost.

36.(p. 162) What serves as an articulation of the fundamental principles at the heart of the organization and should guide all decisions without abridgment?A.Annual reportB.Vision statementC.Mission statementD.Income statement

The mission statement or corporate credo serves as an articulation of the fundamental principles at the heart of the organization and those that should guide all decisions, without abridgment.

37.(p. 162) As with the construction of a personal code or mission, it is critical to first: A.articulate a clear vision regarding the firm's direction.

B.   ask yourself what you stand for or what the company stands for.C.to believe that the culture is actually possible, achievable.D.to identify clear steps as to how the cultural shift will occur.

As with the construction of a personal code or mission, it is critical to first ask yourself what you stand for or what the company stands for.

38.(p. 162) The second step in the development of guiding principles for the firm is: A.asking yourself what you stand for or what the company stands for.B.   the articulation of a clear vision regarding the firm's direction.C.to identify clear steps as to how the cultural shift will occur.D.to believe that the culture is actually possible, achievable.

The second step in the development of guiding principles for the firm is the articulation of a clear vision regarding the firm's direction.

39.(p. 163) Identify the most determinative element in integration, without which, there is no clarity of purpose, priorities, or process.A.EthicsB.LeadershipC.MoresD.   Communication

One of the most determinative elements of integration is communication because without it there is no clarity of purpose, priorities, or process.

40.(p. 165) Which of the following involves the disclosure of unethical or illegal activities to someone who is in a position to take action to prevent or punish the wrongdoing?A.   WhistleblowingB.RedliningC.GentrificationD.Flyposting

Whistleblowing involves the disclosure of unethical or illegal activities to someone who is in a position to take action to prevent or punish the wrongdoing.

41.(p. 165) Identify the correct statement about whistleblowing.A.It involves the disclosure of illegal activities, and not unethical activities.B.It may seem disloyal, but it does not harm the business.C.   It can occur both internally and externally.D. It can expose illegal and unethical activities, but cannot end them.

Whistleblowing can occur internally, as when Sherron Watkins reported her concerns to Ken Lay regarding Enron. Whistleblowing can also occur externally when employees report wrongdoing to legal authorities.

42.(p. 167) Which of the following allows organizations to uncover silent vulnerabilities that could pose challenges later to the firm, serving as a vital element in risk assessment and prevention?

A. Strict implementation of the code of conduct. B.Ongoing assessment of the corporate culture.C.Free-flowing communication between hierarchies.D.Ethics ombudsmen and hotlines.

Monitoring and an ongoing ethics audit allow organizations to uncover silent vulnerabilities that could pose challenges later to the firm, thus serving as a vital element in risk assessment and prevention.

43.(p. 167) What is the term used to describe a potentially damaging or ethically challenged corporate culture?A."Caustic" cultureB."Pyrophoric" cultureC."Corrosive" cultureD."Toxic" culture

A potentially damaging or ethically challenged corporate culture is sometimes referred to as a "toxic" culture.

44.(p. 169) Which of the following prescriptions of the United States Sentencing Commission (USSC) assigns most federal crimes to one of 43 "offense levels," based on the severity of the offense?

A.   Federal Sentencing Guidelines for OrganizationsB.Federal Guidelines of Offense for OrganizationsC.Federal Prescription of Offensive LevelsD.The Doctrine of Offensive Levels for Organizations

Beginning in 1987, the USSC prescribed mandatory Federal Sentencing Guidelines for Organizations. These prescriptions, based on the severity of the offense, assign most federal crimes to one of 43 "offense levels."

45.(p. 169) The Supreme Court separated the "mandatory" element of the Federal Sentencing Guidelines for Organizations from their advisory role, holding that their mandatory nature:A.made it impossible to pass an accurate sentence.B.discouraged whistleblowing.C.   violated the Sixth Amendment right to a jury trial.D. encouraged internal whistleblowing.

In the October 2004 decision in U.S. v. Booker, the Supreme Court separated the "mandatory" element of the Federal Sentencing Guidelines for Organizations from their advisory role, holding that their mandatory nature violated the Sixth Amendment right to a jury trial.

46.(p. 170) Which of the following directed the USSC to consider and to review its guidelines for fraud relating to securities and accounting, as well as to obstruction of justice, and specifically asked for severe and aggressive deterrents in sentencing recommendations?

A. Bank Secrecy ActB.   Sarbanes-Oxley ActC.Gramm-Leach-Bliley ActD.Financial Services Modernization Act

The USSC strived to use the Federal Sentencing Guidelines for Organizations to create both a legal and an ethical corporate environment. This effort was supported by the Sarbanes-Oxley Act, which subsequently directed the USSC to consider and to review its guidelines for fraud relating to securities and accounting, as well as to obstruction of justice, and specifically asked for severe and aggressive deterrents in sentencing recommendations.

Fill in the Blank Questions

47.(p. 146) Every organization has a _____ fashioned by a shared pattern of beliefs, expectations, and meanings that influence and guide the thinking and behaviors of the members of that organization.culture

Every organization has a culture fashioned by a shared pattern of beliefs, expectations, and meanings that influence and guide the thinking and behaviors of the members of that organization.

48.(p. 146) If one joins a firm with a culture that supports values than those with which one is comfortable, there will be a _____— for better or worse.values conflict

If you join a firm with a culture that supports other values than those with which you are comfortable, there will be values conflicts—for better or worse.

49.(p. 148) The phrases "that's how things have always been done here" or "that's our prevailing climate," tells us that culture can serve to _____ an organization in the common ways of managing issues.constrain

The culture can also serve to constrain an organization in the common ways of managing issues, as in the typical phrases, "that's how things have always been done here" or "that's our prevailing climate."

50.(p. 148) Defining the specific culture within an organization is not an easy task since it is partially based on each participant's _____ of the culture.perception

Defining the specific culture within an organization is not an easy task since it is partially based on each participant's perception of the culture.

51.(p. 149) In situations where the _____ provides an incomplete answer for ethical decision making, the business culture is likely to be the determining factor in the decision.law

In situations where the law provides an incomplete answer for ethical decision making, the business culture is likely to be the determining factor in the decision.

52.(p. 151-152) The _____ tradition reminds us that we are as likely to act out of habit and based on character as we are to act after careful deliberations.virtue ethics

When we talk about decision making, it is easy to think in terms of a rational, deliberative process in which a person consciously deliberates about and weighs each alternative before acting. But the virtue ethics tradition reminds us that our decisions and our actions are very often less deliberate than that. We are as likely to act out of habit and based on character as we are to act after careful deliberations.

53.(p. 152) Values-based cultures are also known as _____ cultures.integrity-based

In the 1990s, a distinction came to be recognized in types of corporate culture: some firms were classified as compliance-based cultures (the traditional approach) while others were considered to be values-based or integrity-based cultures.

54.(p. 153) A _____ culture will empower legal and audits offices to mandate and monitor compliance with the law and with internal codes.compliance-based

A compliance-based culture will empower legal counsel and audit offices to mandate and to monitor compliance with the law and with internal codes.

55.(p. 153) The argument in favor of a values-based culture is that a compliance culture is only as strong and as precise as the _____ with which workers are expected to comply.rules

The argument in favor of a values-based culture is that a compliance culture is only as strong and as precise as the rules with which workers are expected to comply.

56.(p. 155) Ethics holds a higher position in the firm if a highly skilled individual is hired into an exclusive position as _____ and is given a staff and a budget to support the work required. ethics officer

Ethics was not a priority if the general counsel served as the ethics officer in her "spare time," and no additional resources were allocated to that activity. Ethics holds a different position in the firm if a highly skilled individual is hired into an exclusive position as ethics officer and is given a staff and a budget to support the work required.

57.(p. 157) If an executive is "quietly ethical" within the confines of the top management team, but more distant employees do not know about her or his ethical stance, they are not likely to be perceived as a(n) __.ethical leader

If an executive is "quietly ethical" within the confines of the top management team, but more distant employees do not know about her or his ethical stance, they are not likely to be perceived as an ethical leader.

58.(p. 158) While some means may be ethically more appropriate than others (e.g., persuasion rather than coercion), it is not the method alone that establishes a leader as ethical. The other element of ethical leadership involves the _____ towards which the leader leads.end or objective

While some means may be ethically more appropriate than others (e.g., persuasion rather than coercion), it is not the method alone that establishes a leader as ethical. The other element of ethical leadership involves the end or objective towards which the leader leads.

59.(p. 159) One of the key manifestations of ethical leadership is the articulation of _____ for the organization.values

One of the key manifestations of ethical leadership is the articulation of values for the organization.

60.(p. 165) _____ involves the disclosure of unethical or illegal activities to someone who is in a position to take action to prevent or punish the wrongdoing.Whistleblowing

Whistleblowing involves the disclosure of unethical or illegal activities to someone who is in a position to take action to prevent or punish the wrongdoing.

61.(p. 169) The Federal Sentencing Guidelines for Organizations, based on the severity of the offense, assign most federal crimes to one of 43 " ___."offense levels

Beginning in 1987, the USSC prescribed mandatory Federal Sentencing Guidelines for Organizations that apply to individual and organizational defendants in the federal system, bringing some amount of uniformity and fairness to the system. These prescriptions, based on the severity of the offense, assign most federal crimes to one of 43 "offense levels."

Essay Questions

62.(p. 145-146) What is a corporate culture? How does it shape an employee?

Every organization has a culture, fashioned by a shared pattern of beliefs, expectations, and meanings that influence and guide the thinking and behaviors of the members of that organization. While culture shapes the people who are members of the organization, it is also shaped by the people who comprise it. Even in this age of decentralized corporations and other institutions, there remains a sense of culture in organizations. This is especially true in small local firms, but it is just as true of major global corporations. Despite the fact that corporations have many locations, with diverse employee bases and management styles, an individual working for a large global firm in one country will share various aspects of her or his working culture with someone working for the same firm halfway around the world. This is not to say

that their working environments cannot be wholly different in many regards; the culture, however, survives the distance and differences.

Businesses also have unspoken yet influential standards and expectations. If you join a firm with a culture that supports other values than those with which you are comfortable, there will be valuesconflicts—for better or worse.

63.(p. 146-148) How can culture be both positive and negative in its nature?

A firm's culture can be its sustaining value - that which offers it direction and stability during challenging times. It can, however, also serve to constrain an organization in the common ways of managing issues, as in the typical phrases such as "that's how things have always been done here" or "that's our prevailing climate the stability that can be a benefit at one time can be a barrier to success at another.

64.(p. 148-149) In addition to attitudes, and behaviors, list the other determinants of culture within an organization.

Several of the elements that are easiest to perceive, such as attitudes and behaviors, are only a small fraction of the elements that comprise the culture. In addition, culture is present in and can be determined by exploring any of the following, among others tempo of work, the organization's approach to humor, methods of problem solving, the competitive environment, incentives, individual autonomy, and hierarchical structure.

Even with this list of cultural elements, it can be difficult for individuals in a firm to identify the specific characteristics of the culture within which they work. Culture becomes so much a part of the environment that participants do not even notice its existence.

65.(p. 149) How are the corporate culture and ethics related in an organization?

The law can be ambiguous in determining if a business should make a reasonable accommodation for an employee with certain types of disabilities (allergies, arthritis, dyslexia etc.). In situations where the law is an incomplete guide for ethical decision-making, the business culture is likely to be the determining factor in the decision. Ethical businesses must find ways to encourage, to shape, and to allow ethically responsible decisions.

An ethical culture would be one in which employees are empowered and expected to act in ethically responsible ways even when the law does not require it.

66.(p. 151-152) Explain how corporate culture and virtue ethics are related.

The cultivation of habits, including the cultivation of ethical virtue, is greatly shaped by the culture in which one lives. When we talk about decision-making, it is easy to think in terms of a rational, deliberative process in which a person consciously deliberates about and weighs each alternative before acting. But the virtue ethics tradition reminds us that our decisions and our actions are very often less deliberate than that. We are as likely to act out of habit and based on character than we are to act after careful deliberations. So the question of where we get our habits and character isall-important.

Part of the answer surely is that we can choose to develop some habits rather than others. But it is also clear that our habits are shaped and formed by education and training—by culture. It also takes place in the workplace, where individuals quickly learn appropriate and expected behaviors. Intentionally or not, business institutions provide an environment in which habits are formed and virtues, or vices, are created.

67.(p. 152) How can an ethical culture have a direct effect on the bottom line of an organization?

If attended to and supported, a strong ethical culture can serve as a deterrent to stakeholder damage and improve bottom line sustainability. If ignored, the culture could instead reinforce a perception that "anything goes," and "any way to a better bottom line is acceptable," destroyinglong-term sustainability.

68.(p. 152-153) Describe how a values-based culture works.

A values-based culture is one that reinforces a particular set of values rather than a particular set of rules. Certainly, these firms may have codes of conduct; but those codes are predicated on a statement of values and it is presumed that the code includes mere examples of the values' application. Integrating these values into the firm's culture encourages a decision- making process that uses the values as underlying principles to guide employee decisions rather than ashard-and-fast rules.

The argument in favor of a values-based culture is based on the fact that a compliance culture is only as strong and as precise as the rules with which workers are expected to comply. A firm can only have a certain number of rules and the rules can never

unambiguously apply to every conceivable situation. A values-based culture recognizes that where a rule does not apply, the firm must rely on the personal integrity of its workforce when decisions need to be made. This is not to say that values-based organizations do not include a compliance structure.

69.(p. 153) How does a compliance-based structure work?

A compliance-based culture emphasizes obedience to the rules as the primary responsibility of ethics. A compliance-based culture will empower legal and audits offices to mandate and monitor compliance with the law and with internal codes.

70.(p. 153) Explain the reasoning behind the popularity of the values-based culture.

The argument in favor of a values-based culture is based on the fact that a compliance culture is only as strong and as precise as the rules with which workers are expected to comply. Avalues-based culture recognizes that where a rule does not apply, the firm must rely on the personal integrity of its workforce when decisions need to be made.

71.(p. 154-155) How are leaders responsible for supporting ethical decision-making?

If the goal of corporate culture is to cultivate values, expectations, beliefs, and patterns of behavior that best and most effectively support ethical decision-making, it becomes the primary responsibility of corporate leadership to steward this effort. Leaders are charged with this duty in part because stakeholders throughout the organization are guided to a large extent by the "tone at the top."

If a leader is perceived to be shirking her or his duties, misusing corporate assets, misrepresenting the firm's capabilities, or engaging in other inappropriate behavior, stakeholders receive the message that this type of behavior is not only acceptable, but perhaps expected and certainly the way to get ahead in that organization. Instead, if a leader is clearly placing her or his own ethical behavior above any other consideration, stakeholders are guided to follow that role model and to emulate that priority scheme.

Beyond personal behavior, leadership sets the tone through other mechanisms such as the dedication of resources. Ethical business leaders not only talk about ethics and act ethically on a personal level, but they also allocate corporate resources to support and promote ethical behavior. There is along-standing credo of management: "budgeting

is all about values." More common versions are "put your money where your mouth is" and "walk the talk."

72.(p. 156-157) What characters are requisite within a leader to be perceived as being ethical?

One study of the nature of ethical leadership emphasized the importance of being perceived as apeople-oriented leader, as well as the importance of leaders engaging in visible ethical action. Traits that were also important included receptivity, listening, and openness, in addition to the more traditionally considered traits of integrity, honesty, and trustworthiness. Finally, being perceived as having a broad ethical awareness, showing concern for multiple stakeholders, and using ethical decision processes are also important. Those perceived as ethical leaders do many of the things "traditional leaders" do (e.g., reinforce the conduct they are looking for, create standards for behavior, and so on), but they do that within the context of an ethics agenda. People perceive that the ethical leader's goal is not simply job performance, but performance that is consistent with a set of ethical values and principles. Finally, ethical leaders demonstrate caring for people (employees and external stakeholders) in the process.

73.(p. 158) What are the differences between an effective leader and an ethical leader?

Leaders guide, direct, and escort others towards a destination, an effective leader is someone who does this successfully and, presumably, efficiently. Effective leaders are able to get followers to their common destination. But not every effective leader is an ethical leader. One key difference lies with the means used to motivate others and achieve one's goals. Effective leaders might be able to achieve their goals through threats, intimidation, harassment, and coercion. One can also lead using more attractive means such as modeling ethical behavior, persuasion, or simply using one's institutional role.

Certainly ethically appropriate methods of leadership are central to becoming an ethical leader. Creating a corporate culture in which employees are empowered and expected to make ethically responsible decisions is a necessary part of being an ethical business leader. But while some means may be ethically better than others (e.g., persuasion rather than coercion), it is not the method alone that establishes a leader as ethical. While perhaps necessary, ethical means of leading others are not sufficient for establishing ethical leadership. The other element of ethical leadership involves the end or objective towards which the leader leads.

74.(p. 159-162) What is a code of conduct? What is its role within an organization?

One of the key manifestations of ethical leadership is the articulation of values for the organization. Before impacting the culture through a code of conduct or statement of values, a firm must first determine its mission. In the absence of other values, the only value is profit— at any cost. Therefore, without additional guidance from the top, a firm is sending a clear message that a worker should do whatever it takes to reap profits.A code of conduct, therefore, may more specifically delineate this foundation both for internal stakeholders such as employees and for external stakeholders such as customers. The code has the potential to both enhance corporate reputation and provide concrete guidance for internaldecision-making, thus creating a built-in risk management system.By establishing the core tenets on which a company is built, corporate leadership is effectively laying down the law with regard to the basis and objectives for all future decisions.

75.(p. 163) What is the last determining factor for the success of a code to impact culture?

To have an effective code that will successfully impact culture, there must be a belief throughout the organization that this culture is actually possible, achievable. If conflicts remain that will prevent certain components from being realized, or if key leadership is not on board, no one will have faith in the changes articulated.

76.(p. 163-165) How is communication important for the integration of an ethical culture? What is whistleblowing?

Integrating an ethical culture throughout a firm and providing means for enforcement is vitally critical both to the success of any cultural shift and to the impact on all stakeholders. One of the most determinative elements of integration is communication because without it, there is no clarity of purpose, priorities, or process. Communication of culture must be incorporated into the firm's vocabulary, habits, and attitudes to become an essential element in the corporate life,decision-making, and determination of success.

Whistleblowing involves the disclosure of unethical or illegal activities to someone who is in the position to take action to prevent or punish the wrongdoing. Whistleblowing can expose and end unethical activities, but it can also seem disloyal, it can harm the business, and it can extract significant costs on the whistleblower.