BECG Unit 2 Notes

Corporate culture
Corporate culture is the collection of values, beliefs, ethics and attitudes that characterize an
organization and guide its practices.
To some extent, an organization's culture can be articulated in its mission statement or vision
statement. Elements of corporate culture include the organization's physical environment,
human resource management practices and staff work habits.
Corporate culture is also reflected in the degree of emphasis placed on various defining
elements such as hierarchy, process, innovation, collaboration, competition, community
involvement and social engagement.
All organizations, whether they are for-profit companies or non-profit entities or even
government agencies, have a sense of self that can be called corporate culture.

Need and importance of business ethics

1. Stop business malpractices: Some unscrupulous businessman do business malpractices by
indulging in unfair trade practices like black marketing, artificial high pricing, selling of
duplicate products.
2. Improve customer’s confidence: Business ethics are needed to improve the customer’s
confidence about the quality, utility, reliability, quantity, price etc., of the products. The
customers have more trust and confidence in the business who follow ethical business
rules or principles.
3. Survival of business: Business ethics are mandatory or compulsory for the survival of any
business. The businessmen who do not follow it will only have short-term success, but they
will fail in the long run.
4. Safeguarding consumer’s rights: The consumer has many rights such as the right to health
and safety, right to be informed, right to choose, right to be heard, right to redress, right
to be satisfied, etc. But many businessmen do not respect and protect these rights of their
consumers. Business ethics are must to safeguard these basic rights of the consumers. A
business who safeguards its consumers' rights, in fact, safeguards its own existence.
5. Protecting employees and shareholders: Business ethics are required to protect the
interest of employees, shareholders, competitors, dealers, suppliers, customers,
government, etc. It protects them from exploiting each other through unfair trade
practices like cheatings or frauds. Ethics compels each entity participating in the business
activity to properly execute its role by adhering the established code of conduct.
6. Develops good relations: Business ethics are important to develop good and friendly
relations between business and society. This will result in a regular supply of good quality
goods and services at low prices to the society. It will also result in good profits for the
businesses thereby resulting in the growth of the economy.
7. Creates good image: Business ethics create a good image for the business and
businessmen. If the businessmen follow all ethical rules, then they will be fully accepted
and not criticized by society. The society will always support those businessmen who
follow the necessary code of conduct and avoids engaging in unscrupulous activities.
8. Smooth functioning: If the business follows all the business ethics, then the employees,
shareholders, consumers, dealers, and suppliers will all be happy. So, they will give full
cooperation to the business. This will result in the smooth functioning of business
activities. So, the business will grow, expand and diversify easily and quickly.
9. Consumer movement: Business ethics are gaining importance because of the growth of
consumer movements all over the world. Today, consumers are well aware of their rights.
Now, they are more united and organized, and hence cannot be easily cheated. They take
actions against those businessmen who indulge in bad business practices. They boycott
poor quality, unreliable, harmful, high-priced, and counterfeit (duplicate) goods
10. Consumer satisfaction: Today, the consumer is the king of the market. He can make a
business or break a business. His every wish (expectations) should be taken as a command
and must be fulfilled as early as possible. Any business simply cannot survive without its
consumers. Therefore, the main aim or objective of a business must be to achieve the
highest level of consumer satisfaction.
11. Importance of labor: Labour, i.e. employees, workers, or active staff play a very crucial role
in the success of a business. They are the main wheels on which business actually runs. A
business must use business ethics while dealing with its employees. The business must
give them timely monetary compensation for their hard work by releasing appropriate
wages or salaries based on working hours. The business must also provide good working
conditions for its employees.
12. Healthy competition: Today, competition is a part and parcel of our lives and business
world is no exception to this. Competition is essential because it inculcates creativity and
innovation, competitive pricing, affordable services, corporate responsibility, consumer
satisfaction, etc. in the realm of business. This competition must be healthy and should
not be aggressive, fierce or cut-throat. A business must treat its competitors as fellows and
not as rival enemies

Relationship between ethics and business

 Business that exhibit and promote strong corporate codes of ethics are more prosperous
in the long run because they show a commitment to an expectation of sound moral
behavior. This demonstrates a dedication to society, customers, employees and the
business itself. It also enhances a company’s reputation if they become commonly known
as an ethical company, and this brings more value to the organization.
 The highly competitive environment in today's global economy puts pressures on
company leaders to remain profitable and to show a good return to stakeholders. Often
this pressure can result in unethical decisions being made in order to deliver positive
results.
 As leaders show unethical behaviour, and perhaps even justify such behaviour while
knowing it to be wrong, this eventually becomes a part of organisational culture. People
follow by example, and the lack of moral judgment will spread.
 In the long run, managers and leaders who promote an atmosphere with low ethical
standards bring harm the business. While it may not necessarily shut the business down,
it will impact the opportunity to increase revenues to its fullest potential.
 Good business practices starts with management setting standards of what's expected,
and they should lead by example. The establishment of higher levels of ethical behaviour
within a business benefits the company in many ways. It displays strong values have been
set for a commitment to company philosophy and mission.
 There is no good reason why a company cannot make ethically sound decisions, and still
turn a profit. Cheating and/or lying do not bring value to a business, and it also affects
employee morale. Employees and reputation are two very valuable assets, and by
promoting a morally sound environment for both employees and customers; this can only
enhance those assets.

Building an ethical corporate culture

 Be a role model and be visible. Your employees look to the behaviour of top management
as a model of what’s acceptable behaviour in the workplace. When senior management
is observed (by subordinates) to take the ethical high road, it sends a positive message
for all employees.
 Communicate ethical expectations. Ethical ambiguities can be reduced by creating and
disseminating an organizational code of ethics. It should state the organization’s primary
values and the ethical rules that employees are expected to follow.
 Offer ethics training. Set up seminars, workshops, and similar ethical training programs.
Use these training sessions to reinforce the organization’s standards of conduct, to clarify
what practices are and are not permissible, and to address possible ethical dilemmas.
 Visibly reward ethical acts and punish unethical ones. Performance appraisals of
managers should include a point-by-point evaluation of how his or her decisions measure
up against the organization’s code of ethics. Appraisals must include the means taken to
achieve goals as well as the ends themselves. People who act ethically should be visibly
rewarded for their behaviour. Just as importantly, unethical acts should be punished.
 Provide protective mechanisms. The organization needs to provide formal mechanisms
so that employees can discuss ethical dilemmas and report unethical behaviour without
fear of reprimand. This might include creation of ethical counsellors, ombudsmen, or
ethical officers.

The impact of business environment

Employees make better decisions in less time with business ethics as a guiding principle; this
increases productivity and overall employee morale. When employees complete work in a
way that is based on honesty and integrity, the whole organization benefits. Employees who
work for a corporation that demands a high standard of business ethics in all facets of
operations are more likely to perform their job duties at a higher level and are also more
inclined to stay loyal to that organization.
 Leadership and code of ethics
• Integrity: Integrity is the cornerstone of all values. A business manager should be morally
upright. It is this characteristic that distinguishes a professional manager from a
mercenary.
• Impartiality: A manager should look at and treat all aspects of an issue in a fair and
unprejudiced manner. Responsiveness to the public interest: Though a manager is paid
to serve the interests of the stockholders of the company, public interest is no less
important. In fact, managers should consider it as of paramount importance, if they have
to be successful in their tasks.
• Accountability: Accountability is one of the basic characteristics of a good business
manager. Business managers are responsible for all their actions and are accountable to
all the stakeholders—stockholders, creditors, employees, consumers, government and
the society at large.
• Honesty: A cardinal ethical value that a manager should possess is this quality. Managers
should be fair, just and sincere both in character and behaviour. They should not indulge
in cheating or stealing and should be free of deceit and untruthfulness.
• Transparency: Good business managers should be transparent and set standards for
others to follow. They should be frank and open. Their actions should be easily discussed
and understood by others.

Ethical dilemma
An ethical dilemma (ethical paradox or moral dilemma) is a problem in the decision-making
process between two possible options, neither of which is absolutely acceptable from an
ethical perspective. Although we face many ethical and moral problems in our lives, most of
them come with relatively straightforward solutions.
On the other hand, ethical dilemmas are extremely complicated challenges that cannot be
easily solved. Therefore, the ability to find the optimal solution in such situations is critical to
everyone.
Every person may encounter an ethical dilemma in almost every aspect of their life, including
personal, social, and professional.
Examples:
 Taking credit for others' work.
 Offering a client a worse product for your own profit.
 Utilizing inside knowledge for your own profit.
Ethical decision making
1. Recognize an ethical issue
 Could this decision or situation be damaging to someone or to some group? Does this
decision involve a choice between a good and bad alternative, or perhaps between two
"goods" or between two "bads"?
 Is this issue about more than what is legal or what is most efficient? If so, how?

2. Get the facts

 What are the relevant facts of the case? What facts are not known? Can I learn more about
the situation? Do I know enough to make a decision?
 What individuals and groups have an important stake in the outcome? Are some concerns
more important? Why?
 What are the options for acting? Have all the relevant persons and groups been consulted?
Have I identified creative options?

3. Evaluate alternative actions

 Which option will produce the most good and do the least harm? (The Utilitarian
Approach)
 Which option best respects the rights of all who have a stake? (The Rights Approach)
 Which option treats people equally or proportionately? (The Justice Approach)
 Which option best serves the community as a whole, not just some members? (The
Common Good Approach)
 Which option leads me to act as the sort of person I want to be? (The Virtue Approach)

4. Make a decision and test it

 Considering all these approaches, which option best addresses the situation?
 If I told someone I respect -- or told a television audience -- which option I have chosen,
what would they say?

5. Act and reflect on the outcome

 How can my decision be implemented with the greatest care and attention to the concerns
of all stakeholders?
 How did my decision turn out and what have I learned from this specific situation
Five sources of ethical standards
• The Utilitarian Approach - Some ethicists emphasize that the ethical action is the one that
provides the most good or does the least harm, or, to put it another way, produces the
greatest balance of good over harm.
• The Rights Approach - This approach starts from the belief that humans have a dignity
based on their human nature per se or on their ability to choose freely what they do with
their lives.
• The Fairness or Justice Approach - Today we use this idea to say that ethical actions treat
all human beings equally-or if unequally, then fairly based on some standard that is
defensible.
• The Common Good Approach - This approach suggests that the interlocking relationships
of society are the basis of ethical reasoning and that respect and compassion for all others
-- especially the vulnerable -- are requirements of such reasoning.
• The Virtue Approach - A very ancient approach to ethics is that ethical actions ought to be
consistent with certain ideal virtues that provide for the full development of our humanity.

The impact of globalization on corporate culture

Increased Cultural Diversity

As globalization becomes more prevalent, companies deal with increased cultural diversity
within the workforce. These changes require small and large businesses adopt new policies
and guidelines for workers. This increased cultural diversity also has produced many
benefits as companies gain new insights into different cultures from a management and a
marketing standpoint.

Earnings Changes for Workers

As more companies have access to overseas companies that offer outsourcing, wages have
changed for many workers. With lower standards of living, third world companies can offer
their services at a rate greatly reduced from those in countries with higher standards of
living. This has affected many workers in the United States as well as other large countries
as more companies embrace the outsourcing trend. While it means a greater profit margin
for the companies, it can also lead to reduced earning potential for employees.
Employee Diversity Training

Cultural, religious and ethnic diversity in the workplace presents a need for more employee
training. In order to protect their companies and their new employees from discrimination,
managers have had to implement policies and offer training to existing employees to make
sure everyone can accept one another. This has led to a greater appreciation of other
cultures and viewpoints in some companies, while irritating some employees who prefer a
less culturally diverse work environment.

Increased Workplace Standards

Companies in foreign countries, particularly in the third world, have had to adopt a more
Western standard in terms of providing better workplace safety and increasing workplace
condition standards. This directly benefits the employees who may have been previously
working in unsafe or unsanitary conditions. While conditions still remain poor in some areas,
an increase in concern over worker safety is apparent, particularly in larger companies.
Additionally, concerns over child labor has improved the conditions for young workers in
these poorer countries.

CSR as part of corporate culture

 Corporate social responsibility (CSR) is a self-regulating business model that helps a
company be socially accountable—to itself, its stakeholders, and the public. By practicing
corporate social responsibility, also called corporate citizenship, companies can be
conscious of the kind of impact they are having on all aspects of society, including
economic, social, and environmental.
 To engage in CSR means that, in the ordinary course of business, a company is operating
in ways that enhance society and the environment, instead of contributing negatively to
them.
 The term corporate social responsibility (CSR) refers to practices and policies undertaken
by corporations that are intended to have a positive influence on the world. The key idea
behind CSR is for corporations to pursue other pro-social objectives, in addition to
maximizing profits.
 Examples of common CSR objectives include minimizing environmental externalities,
promoting volunteerism among company employees, and donating to charity.