The Relationship between Business Ethics and Organizational Culture - Essay Example

The Relationship between Business Ethics and Organizational Culture Business ethics refers to the manner in which a business undertakes its day to day operations and this process is usually based on moral guidelines which are perceived by the immediate society to be upright. Organizational culture on the other hand refers to the general conduct of the individuals who manage the proceedings of a particular business organization. It comprises of organizational virtues, missions, objectives, vision and operational language in the organization setup. Research into cultural variables has been carried out and the outcome reveals that the ethical perception of an organization is dependent on its organizational behavior. Other researchers have also revealed that employees’ behavior is hugely influenced by value system organizational culture. It has been discovered that unethical and illegal conduct by corporate agents has a huge capability of creating adverse effects on the immediate stakeholders. Culture is perceived to be just one of the variables that influence an organization as a whole but with very significant effects. The leadership and members of an organization have a big role to play in constructing, enforcing and retaining the culture within their organization since culture can easily be manipulated by these very same people. Organizational culture can be viewed from various approaches. The first approach involves a traditional perspective; this involves objectives matter such as: rituals, symbolism and tales. Secondly, it can be viewed from an interpretive perspective; this involves the study of how members of a given organization could be having a common subjective meaning towards the organization. Lastly, organizational culture can be viewed from a critical-interpretive perspective; this involves the study of the common subjective meanings within an organization and the possible struggles for power that could be brought about by the competition among the subjective meaning. Although there are a few commonalities, organizational culture widely varies from one organization to another. Enron Corporation was once one of the most successful corporations with almost everything handled in the correct manner. It was known for its comprehensive management control and a proper system of governance which led the corporation to winning several awards in acknowledgement of the same. However things started getting out of hand in the company when unethical organizational culture found its way into the firm. The poor organizational culture involved emergence of irregularities in the financial statements of the firm and embezzlement of funds in the form of using company working capital for personal purposes that are not included in the company budget. The case of Enron provides a firsthand example of how inadequate attention to alteration in cultural practices and leadership of a firm can results to its downfall despite there being a proper management system in place. This is a clear indication that the effectives of variables such as proper management system control heavily rely on an organization’s leadership and culture. Under the tenure of Richard Kinder as the company chief executive officer, the company incurred bad losses which led to some of the investors withdrawing their investments from the company. However, Richard Kinder was well known for his high levels in discipline in handling matters involving both employees and figures. He kept the business unit leaders on toes with numerous challenges. He also kept a close look on matters pertaining to expenses, cash flows and employee levels. But all this did not yield any positive results in preventing the company from incurring losses. However, things changed drastically with the appointment of Jeffrey Skilling as the new chief executive officer to replace Richard Kinder. The organizational culture of the company was also set to change widely with the introduction of a new chief executive officer. Jeffrey Skilling had an almost immediate impact on the company; the company quickly rediscovered its profitable ways. The company managed to accumulate intangible assets in the form of a highly skilled labour force, political affiliations, proper information system and accounting knowledge beyond reproach. These virtues propelled the company to winning the prestigious award of the most prestigious company in America. However, come late 2001 the firm stated that there would be decline in its net income after tax by a sum total of over one billion US dollars attributing this misfortune to accounting errors discovered in the company’s financial statements. In December 2001, Enron was declared bankrupt with a total of 63.4 billion US dollars worth of assets becoming the largest corporate body to be declared bankrupt in the United States of America. This resulted into a drastic fall in the confidence levels of the company’s investors citing several issues regarding regulation, corporate governance and accounting systems within the company. These series of unfortunate events occurring in Enron Corporation may to be attributed to failure by the firm to lay out a proper organizational culture within the company to guide the conduct of its top management. It is clearly visible that every chief executive officer appointed to the company introduced a new form of leadership and culture. This created a room for unethical behavior within the company’s management as we had seen earlier that the business ethics within an organization were highly dependent on the organizational culture existing within the company. The poor organizational culture within Enron Corporation gave an allowance for the occurrence of vices such as corruption and mismanagement of funds. The creation of an organizational culture is highly dependent on what the leadership of the company bases its focus on. New organizational culture emerges with every package of new visions set for a company with every change in its leadership. For instance, in the case of Enron Corporation, the organizational culture of the company was greatly affected by the style of leadership applied by Jeff Skilling. In his leadership, Skilling together with his chief accountant Richard Causey at one point went to the extreme of altering figures just to meet the newly introduced analyst’s consensus. Previously, there had been an incident where was a transfer of funds from reserve account to a profit account. In his leadership, Skilling is considered to have highly value recognition and status with the aim of making the executives richer and focus on profit maximization raising shareholder value. This scenario of Enron provides the top management of any organization with a lesson that it is their core duty to ensure upright organizational culture within a company. The leadership of an organization should value cultural norms to rewards and status to ensure stability within a company in the long run. The leadership of every organization should note and respect the fact that culture that is carelessly formed can lead to employees acting in a manner can adversely influence the management control system of the entire organization. The human resource management could have saved the situation a great deal if only they had carefully analyzed the leadership styles of different individuals before entrusting them with top leadership duties of an organization. For example, in the case of Enron Corporation, Kinder had more acceptable leadership skills than Skilling and retaining him despite the low profits would have done the company a lot of good in the long run. The human resource management should have appreciated the importance of professional integrity in a large corporate body in the form of Enron. It should hire individuals whose ideologies and principles match the working environment of their organization using personal cultural capital. In conclusion, it is therefore appropriate for the human resource management of any organization to hire individuals with great leadership skills for top leadership positions to ensure proper organizational culture and hence ethical conduct within the organization. Works Cited George G. Brenkert, Tom L. Beauchamp. The Oxford Handbook of Business Ethics. london: Oxford University Press, 2011. Hamington, Maurice. Applying Care Ethics to Business. New York: Springer, 2009 Linda K. Trevino, Katherine A. Nelson. Managing Business Ethics. New jersey: John Wiley & Sons, 2009. Lozano, Josep M. Ethics and Organizations: Understanding Business Ethics As a Learning Process. New york: Springer, 2009. Mollie Painter-Morland, Patricia Hogue Werhane. Cutting-Edge Issues in Business Ethics: Continental Challenges to Tradition and Practice. New York: Springer, 2011. O. C. Ferrell, John Fraedrich, Ferrell. Business Ethics: Ethical Decision Making & Cases. connect icut: Cengage Learning, 2011. Patricia Hogue Werhane, Alan E. Singer. Business Ethics in Theory and Practice: Contributions from Asia and New Zealand. New York: Springer, 2009. Sims, Ronald R. Ethics and Organizational Decision Making: A Call for Renewal. London: Greenwood Publishing Group, 2010. 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