LEARNING OBJECTIVES LEARNING OBJECTIVES. Session 11. Ethics, leadership and culture

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1 Session 11 Ethics, leadership and culture LEARNING OBJECTIVES Define the term corporate culture and understand its relationship to ethical culture. Define the term ethical culture and understand the key dimensions found to influence ethical and unethical behaviour. Understand the term ethical leadership and the qualities of an ethical leader. LEARNING OBJECTIVES Understand what can be done at the organisational level to encourage ethical behaviour. Understand how ethical behaviour does not have to conflict with economic performance. 1

2 CORPORATE CULTURE A general constellation of beliefs, mores, customs, value systems and behavioural norms, and ways of doing business that are unique to each corporation, that set a pattern for corporate activities and actions, and that describe the implicit and emergent patterns of behaviour and emotions characterizing life in the organization 4 ARTEFACTS The visible products of the culture including: language technology clothing manner of address myths and stories published lists of values organisational chart structural processes observable rituals and ceremonies ESPOUSED BELIEFS AND VALUES The beliefs and values embodied in strategies, goals and philosophies that work to help employees reduce uncertainty, deal with certain situations or guide their behaviour. 2

3 UNDERLYING ASSUMPTIONS The taken-for-granted beliefs and values that are non-confrontable and non-debatable: what we pay attention to what things mean our emotional reactions what actions to take in a given situation MANAGING CORPORATE CULTURE Corporate culture may not always condone unethical behaviour but sometimes the norms and values of the organisation may ignore or fail to prevent it from occurring. How do people get ahead in the company? What conduct is rewarded? What values are being instilled in employees? ETHICAL CULTURE Ethical climate organisational prescriptions, proscriptions and permissions that determine what constitutes ethical conduct Ethical culture the organisational capacity and conditions that encourage ethical behaviours among employees 3

4 ETHICAL CULTURE AND BEHAVIOUR Ethical role modelling behaviour by managers and supervisors Capability to behave ethically Commitment of managers and employees to behave ethically Openness by managers and employees to discuss ethical issues Reinforcement of ethical behaviour ETHICAL LEADERSHIP Leadership is the process of social influence that exists between leaders and their followers. An ethical leader, therefore, acts proactively towards influencing followers ethical and unethical behaviour. It is not sufficient for leaders to claim that they are ethical, they must establish this reputation PERSONAL MORALITY An authentic leader acts in a manner consistent with his/her true self by expressing what he/she really thinks and believes. Leaders with integrity have clear values which are consistently expressed through their actions. Courage is also listed as a personal trait required of ethical leaders. 4

5 LEADER MORALITY To be a moral manager, leaders must make ethics a priority. The legitimacy of a leader s ethical decisions is crucial for ethical leadership. One cannot be an ethical leader if one s own behaviour is morally questionable. ETHICAL LEADERSHIP BEHAVIOUR Being open with stakeholders shows respect and fairness. Inclusiveness builds trust and transparency. Role modelling must be visible in order to have an impact. Leaders must be sensitive to any negative signals they may send. INSTITUTIONALISING ETHICS Have a highly visible commitment to ethical behaviour from top management down. Encourage members to take moral responsibilities seriously. End defensiveness in the face of public criticism. Solicit the opinion of stakeholders and conduct ethical audits of organisational policies and procedures. Recognise the pluralistic nature of the social system of which they are a part. 5

6 ETHICS PROGRAMS Ethics programs may consist of the following: A code of ethics Policies outlining procedures for investigating and disciplining allegations of unethical behaviour Policies outlining incentives and rewards for ethical behaviour An ethics compliance officer or committee ETHICS PROGRAMS CONT. Ethics programs may consist of the following: Ethics training An ethics helpline Monitoring systems Ethics audits, and pre-employment ethics screening of applicants CODE OF ETHICS Should not be window-dressing or so general as to be useless. It should set reasonable goals and sub-goals It should consider the target audience in terms of its purpose, comprehensibility and relevance to context. It should also convey the board s commitment to ethical standards and be based on principles that aim to raise the ethical sensitivity and confidence of the employees it is directed towards. 6

7 RELATED POLICIES Complementary policies that assist the effectiveness of the code of ethics Legislation provides some protection to whistleblowers In NZ, the Protected Disclosures Act 2000 In Australia, the Corporations Act Internal whistleblower policy ETHICS COMMITTEE Organisational ethics committees can be found in private companies and public institutions. The committee should have full authority and responsibility to communicate the ethical code and subsequent decisions to all corporate members; clarify and interpret the code when the need arises; and facilitate the code s use. EMPLOYEE TRAINING At a minimum ethics training should include: study of the code; review of the company s procedures for handling ethical problems; and discussion of employer and employee responsibilities and expectations. 7

8 REWARD SYSTEMS Motivating behaviour through employees intrinsic needs, rewards and discipline are still recognised as effective tools for leaders to encourage ethical behaviour. A reward system and discipline act as signals of required ethical behaviour to other employees so it must be: clear visible consistent ETHICS MONITORING Research suggests that companies perform poorly in setting and measuring non-financial targets. Internal monitoring assists with the effectiveness of codes of ethics, related policies, and programs and structures designed to enforce and embed ethical standards. ETHICS MONITORING CONT. A recent survey found that few Australian companies appear to possess an explicit reporting framework to underpin their ethical commitments and that boards are most likely to reflect on ethical issues following adverse media exposure, episodes of high turnover and remuneration reviews 8

9 BEYOND THE BOTTOM LINE It is a company s moral duty to respect the rights and dignity of its employees. A number of companies have embraced the ethos and practice of triple bottom line reporting. Profit making and ethical business are not mutually exclusive. BEYOND THE BOTTOM LINE Companies that invest in their employees are likely to reap the benefits of increased productivity through heightened employee morale, satisfaction and commitment. Since employees are a key stakeholder, it is becoming increasingly important to look after their needs, not only to motivate them to comply with ethical standards and thus embed ethics in corporate culture, but also as a general component of ethical business behaviour. A FINAL THOUGHT... A good financial performance is no doubt critical to every enterprise. But to achieve that performance organisations have to have everyone shareholders, employees, customers and the communities in which they operate accepting and supportive of the way in which those profits are earned. 9