LESSON 4

CODES OF ETHICS
AND BUSINESS
CONDUCT
 Codes of Ethics
When huge corporate scandals began to proliferate, companies began
creating communications propaganda for building corporate reputation and
image. Feeling a need to improve their images as they faced increasing
accusations of corruption, businesses turned to ethical codes to publicize
their virtues and create a more positive impression with stakeholders.
•American ethical codes were first called "creeds" or "credos" and those in the 1980s were considered
"legalistic" and more likely to talk about ethics or the reputation of the company (p. 308); they
showed concern over issues like affirmative action (Benson, 1989). Kaptein and Wempe describe
them as policy documents defining responsibilities of the organization to stakeholders and
articulating the conduct expected of employees (2002).Nijhof, et al., note that codes contain open
guidelines describing desirable behaviors and closed guidelines prohibiting certain behaviors (2003).
Ethical codes differ from mission statements by articulating the value system and answering the
question: “Within what ethical standards and values should the mission be pursued”? Sufficient new
evidence that exists show that corporate codes can successfully Moderate ethical behavior.
 Ayala Corporation
Code of Business
Conduct and Ethics
•Ayala adopts as part of its basic operating principles the primacy of the
person, shared values, and the empowerment of people.

•The company and its employees are guided by four core values: integrity,
long-Term vision, empowering leadership, and commitment to national
development. These values are expressed in the company’s Code of Ethical
Behavior, which sets and outlines the general expectations and standards for
employee behavior and ethical conduct.
 What is Corporate Culture?

•Corporate culture refers to the shared values, beliefs, attitudes, and behaviors that characterize an organization. It
encompasses the company's mission, vision, goals, and how employees interact with each other, management, and external
stakeholders. Corporate culture influences employee morale, productivity, and overall organizational performance.

•Culture has a profound influence on all aspects of human behavior. Its impact may be subtle or pronounced, direct or
oblique, or enduring or ephemeral.
•Culture, thus, is a human reality and resides in human communities. It is necessary to deal with the
idea of culture from an anthropological perspective. Philosophical anthropology has taught us that
the human person is an open system and, as such, is capable of learning, but a learning that is
positive (if he is to be truly human) and is made most perfectly positive through the cultivation of
the virtues (Polo, 1997; Polo, 1991). Aristotle spoke so eloquently of the essential transcendence of
human beings and the need for them to be cultured. What one finds in the Protrepticus, so
reconstructed, is an impassioned defense of the primacy of intellectual activity and the importance
of devoting oneself to a life of study and culture.
 Organizational
Refers to the shared values, beliefs, norms, and practices within an organization that shape its members' behavior and

Culture
interactions. It encompasses the organization's mission, vision, goals, leadership style, communication patterns, and employee
relationships. A strong organizational culture can foster cohesion, employee engagement, and alignment with strategic
objectives, while a weak or toxic culture can hinder productivity, innovation, and morale.

The relevance of cultural patterns for what goes on in organizations and different kinds of outcomes is great; the
organizational literature has described this relevance in varied ways. The more common ideas guiding organizational analysis
in this regard include the following functions of culture: culture as social glue, as regulator of social relations, as compass, and
as control mechanism. Other approaches used to describe the function of culture are: culture as tool, as building block, and as
need satisfier (Alvesson, 2002; Racelis, 2010). The social glue idea is perhaps the most common view of culture. The idea
here is that organizations are integrated and controlled through informal, non-structural means-shared values, beliefs,
understandings, and norms. Culture in this sense contributes to the avoidance of fragmentation, conflict, tension, and other
miseries; organizational Life is seen as characterized by consensus, harmony and community (Alvesson, 2002). This is
Sometimes called the integration approach, whereby all cultural members are said to share the Game view of culture, as that
which is clear, rather than ambiguous. As such, culture is the "social lue" that holds members together in an organization-wide
consensus (Siehl and Martin, 1990).
 The Need for Ethical
Organizational Culture
• It is a fact that resource allocation lies at the foundation of any economy;
and businesses ought to employ goods and capabilities, in such a way that
human beings in businesses improve and develop.But business leaders as
well as consumers should be able to question some of the basic assumptions
about the way businesses are managed-they should be able to face the moral
and ethical questions of daily living.They should be able to question the
mindset underlying economic structures based on exploitation, profit
maximization, and capital accumulation (Racelis, 2014).
 •The economics of organizations, however, has to subject itself to ethics, and has to focus on how to
employ those goods and resources as well as human capabilities in accord with the alternatives
available, that is to say, it should constantly seek a possible alternative by which human beings can
improve and grow, which in the ultimate instance is what characterizes the ethical organization (Polo,
1991).We glean the transcendent nature of such goal from the Theory of Human Action in
Organizations whereby Pérez López (1991) explains that the human person in business organizations is
capable of having transcendent motives, which are aspects of reality that determine the achievement of
learning from other people with whom the decision-maker interacts. Rosanas and Velilla (2003) explain
this quite well by saying that the ethical (read “morally good”) manager is, thus, one who provides the
motivational conditions for the organizational members to achieve their full potential which ultimately
means being that free and open system who is capable of self-gift, a radical love which manifests in a
selfless interest in the good of the other.
 Ethical organizational culture is crucial for several reasons:

Trust and Reputation: It fosters trust among stakeholders, including employees, customers, and the public, enhancing
the organization's reputation.

Compliance and Risk Management: It ensures adherence to laws, regulations, and industry standards, reducing the risk
of legal issues, fines, and reputational damage.

Employee Morale and Engagement: It promotes a positive work environment where employees feel valued, respected,
and motivated to contribute their best.

Decision Making: It guides ethical decision-making at all levels of the organization, helping to avoid situations that
could compromise integrity or harm stakeholders.

Customer Loyalty: It builds customer loyalty by demonstrating a commitment to fairness, honesty, and social
responsibility.

Long-Term Sustainability: It contributes to long-term organizational sustainability by minimizing unethical behaviors

that can lead to costly scandals or public backlash.

Overall, ethical organizational culture is not just a moral imperative but also a strategic advantage in today's
interconnected and transparent business landscape.
 Creating
Corporate Code
of Ethics
 Creating an Ethical
Corporate Culture
As mentioned above, Sauser (2013) suggested that an organizational culture grounded in
moral character is the ideal corporate culture. A culture of character is the type of
organizational culture in which positive moral values are ingrained throughout the
organization. Pastin (1986, p. 14) describes organizations exhibiting what we call a culture
of character as those that possess the following four stylistic markers:

•They are at ease interacting with diverse internal and external stakeholder groups. The
ground rules of these firms make the good of these stakeholder groups part of the
organization’s own good.
•They are obsessed with fairness. Their ground rules emphasize that the other person’s interests count as much as their own.

•Responsibility is individual rather than collective, with individuals assuming personal responsibility for actions of the organization.

•They see their activities in terms of purpose. This purpose is a way of operating that members of the organization highly value.

To Pastin’s (1986) list, Sims (2005, p. 406) has added:

•There exists a clear vision and picture of integrity throughout the organization. The vision is owned and embodied by top management, over
time.

•The reward system is aligned with the vision of integrity.

•Policies and practices of the organization are aligned with the vision; there are no mixed

Messages.

•It is understood that every significant leadership decision has ethical value dimensions.

•Everyone is expected to work through conflicting stakeholder value perspec

tives.
Thank
You!