MODULE 3: The Ethical Corporate Culture
The Corporate Culture
Much like the different groups that you are a member of, business organizations also have their own unique culture.
Every organization has a culture that consists of shared patterns of beliefs, expectations, and meanings that influence and
guide the thinking and behavior of the members of that organization. While culture shapes the people in the organization,
the people also contribute to shaping the culture of the organization (Hartman 2014). Organizational or corporate culture
is the system of shared actions, values, and beliefs that develop within an organization and guides the behavior of
its members (Schermerhorn, Osborn, Uhl-Bien, Hunt 2012).
While corporate culture is built and molded over time, it may still change depending on the leaders that move the
company forward. Changes in policies (e.g., dress code) can alter the way people behave or feel toward the company.
Functions of Corporate Culture
A company's culture guides the thinking, behavior, and decisions of its members according to the company's beliefs
and values. According to Edgar H. Schein, author of Organizational Culture and Leadership (2010), the two main reasons
why culture develops in organizations is because of external adaptation and internal integration.
External adaptation requires the organizational culture to determine how the company will reach its goals, accomplish
its tasks, identify methods to achieve its goals, and place measures to cope with success or failure. Members of the
organization may develop common views and goals through their shared experiences. For example, reaching sales targets
to become competitive and profitable in the market uses a goal shared by all the members of the organization. External
challenges, such as economic downturn, bad weather, political issues, and government regulations that may affect how the
company achieves its goals, will have to be dealt with in accordance with the company's culture. For example, if there is a
delay in releasing the company's imported raw materials from customs, should the company bribe customs officials to
expedite the process? The corporate culture will determine the answer to this question.
Internal integration starts with the establishment of an identity that is unique to the business organization. Members
acquire this identity through their interaction with each other. This enables the members to work in harmony with each other
and to work toward advancing the company's goals. There are three important aspects of working together: first, the
members decide who is a member of the group and who is not; second, the members develop an informal understanding of
acceptable and unacceptable behavior; and third, the members separate "friends” from “enemies." Managers should be
equipped in ensuring harmony within the team or organization. It is important for the members to understand what their
roles are in achieving the company's goals and the penalties or incentives that they will get if they perform their roles in
achieving the goals. This is very similar to situations when you need to work on a school project with a group. You most
likely prefer to work with classmates whom you can work well, but in cases when the teacher chooses who your group
mates will be, members within the groups must establish rules (e.g., attending meetings, going online at a certain time,
submitting assigned parts on agreed upon deadlines) in order to achieve the group's goal, which is to submit the school
project on time. This results in a shared identity and collective commitment toward a common goal that everyone in the
group has decided on. If one member does not cooperate, conflicts happen.
Understanding Corporate Culture
A person who recently joined a business organization may not easily figure out the corporate culture. Understanding
organizational culture involves layers of cultural analysis.
Figure 1 shows the different layers of cultural analysis which include observable
aspects of culture (outer layer), shared values (middle layer), and common cultural
assumptions (innermost layer).
Observable culture refers to the way things are done in an organization. This
can be observed in daily activities or in specific instances which include unique
stories according to the company's history, ceremonies, and corporate rituals.
Organizations are rich with their own stories of achieving success and conquering
failures. The story on how a company was founded may contain the owners' ideals,
vision, and the reason why the company was established. It may be to serve a
previously unmet need, to offer solutions to common or not-so-common issues, or
Figure 1: Layers of cultural to give better options to the consumers
analysis
Example:
Bingo, a search engine company, is known to consumers as a company that provides its employees with an
environment that feels like home. The office houses a TV, video games, free food, free Internet, etc. The company's
rationale for this is that happy employees are productive employees.
Shared values refer to the common values that are meant to put together and motivate the members of the
organization. These include a deeper understanding of what the company stands for. For example, a company may be
known for its passion for innovation, green practices, or providing solutions to social issues.
Example:
Happy Filipino is a social business enterprise that aims to train mothers in the community to be financially independent
and entrepreneurial. All the people in the company are oozing with passion and are fully aligned to serve this segment as
they know exactly the plight of these mothers.
Common cultural assumptions include the taken-for-granted truths that the members share because of collective
experience with the organization. These assumptions are at the core of corporate culture and are thus difficult to discern or
understand because they exist at a largely unconscious level, yet they provide the key to understanding why things happen
the way they do. As employees become ingrained in the culture, their actions that are based on the company beliefs and
values become everyday routines. These include quality of output, morality of employees, and innovativeness and
excellence in carrying out tasks, among others.
Example:
Orange Company, a telecommunications company, has ingrained to their employees the value of innovation. Every
time employees meet in elevator, talk over lunch, or are anywhere else in the building, they unknowingly talk about the latest
trends in technology, specifically smartphones, tablets, and the current trends in the telecommunications industry.
Ethical Leadership and Management
There is no doubt that the leaders of a business organization serve as the role models of the beliefs, values, and
behavior that are expected from someone who represents the company. Th top management sets the tone of the corporate
culture, and this must be consistently adopted throughout the firm.
There are two recognized types of corporate culture: compliance-based culture (traditional approach) and values-
based culture (integrity-based).
Compliance-based culture focuses on following rules, laws, policies, and regulations as the primary responsibility of
ethics. It empowers legal counsel and auditing/accounting firms.
Example:
GHI Bank in Muntinlupa City was cited by internal audit because it could not follow the company's policy of dual control,
that is, there should always be two people entering the vault. The CCTV footage showed that there were two instances in
May 2017 that the branch manager entered the vault alone.
On the other hand, values-based culture reinforces a particular set of values rather than a particular set of rules. It is
presumed that a company with a values-based culture adopts its code of conduct with more regard for ethical values.
Values-based culture also recognizes that despite the rules set by the company's code of conduct, there are situations
where rules can be applied so the organization will have to rely on the personal integrity of its workforce when decisions are
to be made.
Example:
Tina Garcia, a known actress of ABGM Network, always goes to her teleserye tapings on time, all the time. She got
these values from the TV Network because all the employees of the ABGM Network give a very high regard to punctuality.
Although there is no formal log-in process, all employees still come on time, all the time.
Ethical leaders are expected to practice ethical decision-making. Their goal is not simply to perform the job, but to
perform consistently with a set of ethical values and principles chosen by the business organization. The ethical leaders are
expected to not just care about company profits but also demonstrate caring for people (internal and external stakeholders)
in the process.
Example:
Eugenio Lapid, a supervisor of a big factory manufacturing electronic products, always ensures to talk to his
subordinates during their breaks even about their personal lives or problems. He treats them as family instead of as simply
subordinates. He also gives them constructive feedback every time they commit mistakes.
A good ethical leader must be visibly practicing the company's traits and behaviors to influence perceptions and actions
among the employees. This is important in creating. inspiring, and transforming an ethical corporate culture within the
company. An effective ethical leader can successfully and efficiently guide, direct, and escort others toward the goals of the
company, in consideration of the ethical standards set by the organization.
Example:
Mrs. Pam Palma has been with JKL Corporation for the past 10 years as executive vice president. Ever since, she
embodies punctuality, is careful with her words, and is very meticulous with her craft. She is also a role model as she was
able to raise her four children well and can balance her career and family life. She never had any case of fraud, employee
complaint, or even one employee resignation.
Not all effective leaders are effective ethical leaders. Some effective leaders may be able to deliver the expected
output of the company with the use of coercion, harassment, or intimidation in directing the employees. However, an
effective ethical leader may use more ideal interpersonal means of motivating employees by modeling ethical behavior,
gentle persuasion, or positive reinforcement by offering incentives.
Example:
MNO Corporation has produced two exemplary leaders in the Information Technology Department and in the Human
Resources Department. The IT head is known as someone who can deliver IT projects even on very short notice. He
ensures that his team members work overtime even on weekends and holidays just to finish the task. He always threatens
that they will get a low performance rating if they do not work overtime. The HR head, on the other hand, is known as
someone who is very pleasant and nice to his team. With no coercion at all, his team members voluntarily go on overtime
whenever there are major key result areas to be finished on a tight deadline. Regardless of the technique, both leaders
were able to deliver results.
Setting a Corporate Code of Conduct
A code of conduct or code of ethics is a list of guidelines and protocols based on the organization's values. It
articulates how an employee should always behave and imbibe the values of the organization, and it also serves as a
reference when decisions are to be made. It is used by an organization to lay out objectively the things that an employee
must do in order to adapt to its corporate culture.
Below are some guidelines in developing a code of conduct for an organization:
1. Understand the mission and vision of the organization. This will set the tone for the required conduct and behavior
that the members must know by heart.
2. Identify the values that the organization lives for.
3. Spell out the different behaviors and values that an employee must follow to maintain the ethical values of the
organization.
4. Ensure proper enforcement of the code of conduct to maintain the ethical culture within the organization.
5. Outsiders, such as suppliers, distributors, subcontractors, and customers, must also understand the organization's
code of conduct to avoid presenting the employees with actions that go against the code.
Below is a sample code of conduct:
Baby Food Corporation upholds the distribution of healthy and safe baby products (clothes, bath and body products,
and accessories) in the market. This code of conduct is drafted to strengthen the company's ideals in serving our customers
well and in giving only the best products to our most important customers, the babies.
Company Values
1. Customer-centered- We strive to provide the best service and products to our customers.
2. Safety-We assure you that our products are safe from harmful chemicals.
3. Integrity - We practice integrity in all our actions, and we promise an honest and fair service to all our employees,
customers, and suppliers
Code of Conduct
Employee Decorum
1. Employees must always practice with mutual respect to one another. The company does not tolerate spreading of
rumors and stories that may taint the reputation of its employees.
2. Employees must practice professional tone in communicating with colleagues, whether oral or written
communication
Usе оf Сотрапу Рrореrtу
1. Employees must only use company properties for official business functions and not for personal gains.
2. Company property is the employees' resources. Everyone must engage proper use, care, maintenance, and
operation of these properties.