Maintaining and Improving the Ethical Culture of a Business Organization

In business, and most other types of organizations, the job of maintaining the values of the company is not the responsibility of any one department or individual; everyone—officers and board, executives, managers, supervisors, and individual contributors—has a role in fostering ethical behavior.  Each is a role model to others and can encourage and motivate fellow employees to "do the right thing."

The Center's Business and Organizational Ethics Partnership, a group of business ethics scholars and executives with responsibility for ethics and compliance, has long been interested in how various functions in an organization contribute to the company's ethical culture. These materials capture the ongoing conversations in that group.

Cae 3 - Unavoidable Ethical Dilemmas for Non-Profits

Non-profit organizations face their own set of ethical challenges and must resolve them based on their organizational values. Here are three scenarios that staff may confront: Scenario No. 1  Your organization depends heavily on volunteers for many tasks and projects.  One volunteer, an attorney, has performed services previously as a volunteer. This time you receive a bill for the services.  When you ask, the attorney says, "Oh, I can't afford to not bill for my time anymore.  It's the economy, you know."  How would you handle this bill? Scenario No. 2 Your staff is shopping for a new office supply vendor, and your executive director asks you to compare prices.  One of your major donors owns and operates ABC, an office supply company, and has expressed interest in your business.  You discover that ABC is considerably more expensive than the others included in your price comparison report. Later you learn that ABC is the new vendor.  How would you respond? Scenario No. 3You and several co-workers attend a conference. They have made similar trips for the organization, but this your first. You keep your expenses very low by using the hotel airport shuttle ($12 round trip), economizing on meals and avoiding any unnecessary expenses. Part of your job involves comparing receipts with expense reports, and when you review your co-workers' receipts you see that they each used a taxi to and from the airport (around $30 one way), ordered room service breakfast, consumed several mini-bar items, sent clothes to the hotel laundry and bought tickets to a concert. What, if anything, do you say to your supervisor? These case studies were developed by Kirk O. Hanson, executive director, and attorney Peter Gielniak to illustrate unavoidable ethical dilemmas in fundraising.  They appeared originally in "Advancing Philanthropy" (March/April 2012)

Case 2 - Passion or Practicality?

The best college student comment on "Passion or Practicality?" wins a $100 Amazon gift certificate. Entries must be received by midnight, September 2. Finalists are selected by likes, so get your friends to like your comment. Subscribe to the blog (by RSS or by email in the right hand column) for updates.

Mark has always loved to draw, creating images from things he’s seen around him and things he conjures up in his own imagination. He is fascinated by the fine arts, and when he pictures his future, he sees himself as a curator of an art museum, or the owner of his own gallery.

 

There’s just one problem. With the recent economic downturn and two younger siblings to think about, Mark faces many daunting financial obstacles in order to pursue his education. As a college freshman, he’s picked up some federal subsidized and unsubsidized loans, but his school’s endowment is less than stellar so he hasn’t received many grants. In essence, he’s looking at about a 150k debt that he’ll have to pay off when he graduates. He plans on continuously applying for merit-based scholarships, but he knows that he’s still going to have a lot on his shoulders. With all of this to consider, his parents are encouraging to pursue something a bit more… “lucrative.” In their minds, something like business or engineering would have a much bigger return than a fine arts or art history degree. They are so serious about this, in fact, that they have decided they will only pay off Mark’s loans if he pursues something that they consider to be practical. If he chooses to pursue something in the arts, Mark will take on his debt by himself.  

 

Mark understands the situation he is in, and wants to be realistic… Perhaps he could become a businessman and sketch on the side, or volunteer at a local museum. However, he also feels like he can’t deny the part of himself that wants to completely follow his number one passion. How can Mark deal with this tug-of-war, respecting both his family’s wishes and his own hopes for the future?

 

Case 1 - Rushing Into Things

 The best college student comment on "Rushing Into Things" wins a $100 Amazon gift certificate. Entries must be received by midnight, September 16. Finalists are selected by likes, so get your friends to like your comment. Subscribe to the blog (by RSS or by email in the right hand column) for updates.

Katie is a freshman, and she has loved the first few weeks of college. However, she feels that she could benefit from a close-knit group of friends; and, unlike many of her peers, she doesn’t feel like she has connected strongly with anyone in her dorm or the few clubs she’s joined.

 

Katie’s older sister is in a sorority at another school, and tells Katie that she should rush for a more built-in community. Beyond gaining friendships, her sister cites leadership opportunities, volunteer work, and a full social calendar on a long list of benefits of “going Greek.”

 

Despite the fact that her sister seems happy with her decision to rush, Katie isn’t so sure. While hazing is banned at her university, she knows all too well that it happens. Recently she heard that one sorority on her campus makes its pledges drink an entire bottle of champagne by themselves after pledging, and she’s heard of even more hazing horror stories from friends at other colleges. Despite the awful things that hazing rituals consist of, though, she’s also heard members say that the hazing process often brings the people in those groups much closer together.

 

Katie longs for a group of girls that will love and accept her in the name of sisterhood, and wouldn’t mind the activities and other benefits that come with it. She knows that, like her sister’s chapter, not all sororities haze. But should she take the risk that she may be forced to do something she doesn’t want to do, even something potentially dangerous, for the sake of making friends? And is she willing to inflict that upon someone else?

 

 

 

Article 3 -Building an Ethical Business Culture in China

By Margaret Steen

What values and trends shape politics, economic policy, and business practices in China? And are these trends also the drivers of business ethics? At a recent meeting of the Business and Organizational Ethics Partnership at Santa Clara University's Markkula Center for Applied Ethics, the focus of one discussion was how to build an ethical business culture in China.

The panel was moderated by Sheridan Tatsuno, owner of Dreamscape Capital, and included Stanley Kwong, professor at the University of San Francisco, and Jacqueline Fan, a partner at Ernst & Young. Meeting participants included business executives, attorneys, consultants, and academics, many with extensive experience in China.

To understand the business climate, it's important to first understand the trends and events that are shaping Chinese society. One recurring theme, for example, was the Cultural Revolution and its ongoing impact. This major disruption to Chinese culture destroyed a lot of traditional values, and young people today aren't necessarily learning about it because the generation that went through it is uncomfortable bringing up the excesses of that time.

China is also undergoing urbanization. Prior to 1980, almost all Chinese lived in the countryside. But in the next few decades, almost two-thirds relocated to and live in cities. This means new marketing opportunities for companies, as the country needs more infrastructure. This increasingly urbanized population is also using social networks, accessing the Internet primarily via cell phone.

With these changes come strains, including those on the educational system. For example, one participant who has trained Chinese workers on Western ethics codes noted that Chinese education puts less emphasis on critical thinking. A common workers' reaction, when presented with principles in training and asked to interpret and apply them, is to say, just tell me what I can and cannot do.

It's also important to remember that China isn't just one market: It's a huge country, with big differences among regions, ethnic groups, and population centers

China faces several other challenges in building a business culture that meets Western ethical standards:

• • The one-child policy is creating a generation of "spoiled" children, people who have trouble cooperating, never having been asked to do so.
• • Chinese culture is full of slogans that may not be taken seriously. There's a risk that a company code of conduct will be viewed as just another slogan.
• • Junior workers in China tend to be loyal to their local boss, not necessarily to a policy or the company, or the national government
• • It's not easy to integrate an ethics code from one culture into a company in another culture.

There are ways that Western companies can create workable policies, however. Some ideas from participants:

• • It may take several additional training sessions to get the company's code of conduct engrained in the Chinese business culture. Some participants mentioned making it the screensaver on workers' computers, or having executives send frequent emails with reminders.
• • Leading by example is a critical way to reinforce the ideas in the organization's code of conduct.
• • American companies need to consider what their competitive advantage is and make use of it in order to thrive in an environment where they can't use bribes to get ahead, though their competitors can. Innovation and high energy, consistent messaging can take the place of bribes.

Margaret Steen is a freelance writer, editor, and writing instructor.

August 2012

Article 2 - Talking Turkey: An Ethical Dilemma Facing Food Drives

By Judy Nadler

Every year the mayor of Rinconia is the honorary chair of the Thanksgiving food drive. Service clubs, churches, schools, and local businesses are encouraged to bring donations of food and money to the local food bank for distribution to the needy. This year, the downturn in the economy coupled with the closure of a local factory has brought an even greater need for donations.

Although the role as chair has historically been honorary, Mayor Irving is running for re-election in the spring primary, and has decided to take a more "hands-on" approach to the food drive.

In addition to personally calling each of the local restaurants and grocery stores, he has spoken with the city planning director to get an update on the proposal for converting the now vacant factory building into a Big and Thrifty warehouse store. The controversial project has been sent back for redesign several times due to objections of the neighbors who are concerned about traffic, parking, and the loss of business to existing retail stores.

The mayor has pressed for action on the zoning approvals, and told the planning staff, "I think I can get a hundred or so turkeys from Big and Thrifty if we expedite the approval. They won't be open for Thanksgiving, but if we 'fast track' the process they might be able to cash in on the Christmas holidays."

When the regional manager for the chain was approached by the mayor and asked to donate 100 turkeys, he didn't think he had the option to say "no." In a memo to the president of the company, he wrote, "If we want to move ahead as fast as possible on converting the factory to a warehouse, it will cost us 100 turkeys. It's for a good cause, so I think we should do it, but I hope we don't get 'squeezed' like this in the future."

In his thank you note, the mayor said, "Your generous donation has earned you a special place in our community. I look forward to working with you in the future."

Discussion questions:

Should the mayor be making personal "asks" from local businesses?

Did the mayor do anything wrong in meeting with the planning staff?

Is there a downside if the new chain donates 100 turkeys to the food drive?

Judy Nadler is senior fellow in government ethics at the Markkula Center for Applied Ethics.

November 2012

Article 1 - The Nexus of the Law and Ethics

Immoral or illegal, or both? Intrinsically evil or rendered wrong by statute? When contemplating how business leaders make decisions, perhaps it's not necessary to parse the ethics of a specific choice, or focus on what morally could or should be done.

The key to ethical decision making mostly lies in the determination of what is "smart," according to Joseph Grundfest, professor of law and business at the Stanford Law School and a nationally recognized expert on corporate governance.

It's relatively straightforward to ascertain whether something is legal. But ethical deliberations can get impractically messy, he said. Grundfest asserted that it's more productive for businesses to ask the question, "Is it smart?" rather than wade into a morass of moral questions. His lively comments sparked a brisk debate at the Nov. 14 Business and Organizational Ethics Partnership meeting sponsored by SCU's Markkula Center For Applied Ethics.

Grundfest, a former Securities and Exchange Commission member, and former staff member for the President's Council of Economic Advisors, posited that business leaders don't respond positively to ethics discussions when looking at what's best for their companies. Their motivation, once they dispatch the question of legality – that is, does any law preclude the contemplated course of action – is to behave in a way that is good, "smart," for business. Thus, a completely legal action – say a particular investment – may be utterly counterproductive when it comes to public appearances, negative publicity and the potential for investigation or litigation, he told the roomful of Bay Area business executives, and ethics and compliance offers.

Nor are ethics and smartness mutually exclusive concepts, he said. Most of the time, the ethical course of action will end up being the one that is good for the company's bottom line and reputation as well.

Grundfest's rationale raised the hackles of Kirk O. Hanson, director of the Markkula Center, who bemoaned the notion of underpinning decisions with the "smart" question while sidelining an up-front discussion of what is and is not ethical.

"We ethicists have to raise an objection," Hanson protested. As a business executive, to say something is not smart "from a self-interested, capitalist view, I am not going to be sensitive to all the ethical questions that I may face. I'm going to miss many more of these that you claim are not smart, because I'm not asking the ethical question" as it relates to all of the stakeholders involved in the decision, he said.

Further, a person's sensibilities on moral behavior are compromised, "by saying you don't ever have to think about ethics, but you just have to think about smartness," he said. "Unless you have a model in your head of what is ethical and what's not, you're never going to get to the smart question."

Grundfest insisted that "99 percent of the time" the smart question will result in an ethical decision. Several of the attendees applauded the philosophy as a business standard.

The problem Grundfest outlined was that "by framing the questions in terms of the word ethical, you hit so many emotional hot buttons." Addressing legality is not so complicated but people disagree on what's ethical, and such disagreements bog down decision making, he said, because "calling something ethical is a loaded term." By hewing to what's legal and what's smart for the company, the business leaders will do a better job than by saying, "We are going to have high standards of ethics at this company, as a practical matter," he concluded.

Grundfest noted the evolving nature of what constitutes ethical behavior as societal views shift over time and geography, with laws changing accordingly on such topics as same-sex marriage, abortion, and less controversial issues like divorce. Different states and communities, civil and religious, hold different views that complicate ethical discussions in business, and make the "smart" question even more useful, he added.

These different views are at the heart of the law and ethics challenge, he said. It is up to society to ascertain which behaviors are so reprehensible that they merit a ban or regulation, and in a democracy representing many points of view, sometimes those decisions simply have not been made.

November 2012