Corporate Culture Impacts Employee Behavior

Of course, not only do cultural factors impact business ethics across countries, but corporate culture varies across corporations. Therefore, let us next focus on corporate culture before turning our attention to SR, CSR, and corporate sustainability. The lives of billions of people today are influenced by national and multinational corporations that wield a great deal of power across various countries, trade in many markets, and have a pivotal impact on domestic and international legislation and practices. As Simpson and Taylor (2013, 36-37) noted, “ ... the power vested in a small number of individuals within these corporations is considerable [and],.... As a result, the ethics of management, and thus the morality of the organization, is of considerable interest.” While the prevailing culture and values of a corporation vary, as will be discussed further in this chapter, Australian research by Simpson and Taylor indicated that the values of the society (e.g., Greece or Germany or China) from which the employees are recruited are reflected in the values of an organization.

Drawing on Simpson and Taylor’s (2013) excellent discussion of “corporate culture,” we find that a number of definitions have been proposed for it, including Askhanasy, Wilderom, and Peterson’s (2000) “shared meanings, values, attitudes and beliefs that are created and communicated within an organisation” (Simpson and Taylor 2013, 38) and Bowers and Seashore’s (1966) “culture is the best way we do things around here” (cited by Simpson and Taylor, p. 38). A crucial feature of the corporate culture of an organization pointed out by Simpson and Taylor is that while some of its components are visible, certain others are hidden and/or have unwritten rules. Thus, for them “culture” incorporates unwritten rules, assumptions about expected behavior, styles and attitudes formed from national culture, and “prevailing orthodoxies or moralities in the society and environment that surrounds the organization and from which most employees come” (p. 38). A visible component of a corporation’s culture is its code of conduct. Adams, Tashchioan, and Shore (2001) found that the mere existence of a code of conduct seems to impact positively on how ethical behavior is perceived in organizations. Interestingly, Alleyne and Pesi (2013) analyzed data from a survey of 71 people working in the service industry and found that most of them agreed that corporate culture helped to identify, eliminate, and prevent fraud.

Corporate culture is passed on to new employees by socialization processes and sometimes through formal induction procedures and is subsequently reinforced (Simpson and Taylor 2013, 77). If the ethics and values of the organization are compatible with those of an employee and reflect the employee’s own immediate societal norms, he/she will be more receptive to the aims ofthe socialization and more likely to adopt the norms and behaviors than if incompatibility is present. Furthermore, a new employee’s socialization outcome will also be influenced by the group in which he/she will be functioning in the organization. If there is a mismatch between a newcomer’s moral code and the organization’s behavioral norms, then the conflict created needs to be resolved. In fact, techniques are at hand by which a new employee can be so socialized as to tolerate unethical practices (p. 82). According to Simpson and Taylor (2013, 82—83), these techniques are co-optation (i.e., rewards are used to induce an attitude change toward the unethical behavior); instrumentalism (i.e., one is introduced to unethical behaviors gradually); and compromise (i.e., confronted with a problem or a dilemma, an individual carries out a corrupt act and rationalizes it).

The culture of an organization impacts the behavior of the employees. If, for example, the main characteristic of an organization’s corporate culture is winning or gaining profit at any cost, it will be conducive for executives to “cut corners” to achieve their productivity targets and obtain their contractual monetary rewards. Similarly, such a culture encourages corrupt practices and not only for the top management. It should also be noted in this context that groupings of people, alliances, and networks that can justifiably be termed subcultures occur in an organization and these sometimes extend beyond the organization (p. 46). Employees as well as management belonging to such a subculture share values and ethical standards. When there is a takeover or a merger, it may well give rise to a counterculture—in other words, an alliance of employees who are bonded together by their dissatisfaction with the ethos of the new entity (Simpson and Taylor 2013, 47).

An “extreme aspect of organizational culture and its interaction with small groups of individuals” is coined groupthink.¹ According to Simpson and Taylor (2013), this phenomenon comes about when members of a group believe in their own inherent morality and invulnerability, are overly optimistic and more likely to take risks, are characterized by closed-mindedness, have stereotypical views of outsiders, and are expected to be loyal and are under strong pressure to conform. A groupthink-style culture was a feature of Enron alongside emphases on continuous profit whatever the price and intolerance of failure (Simpson and Taylor 2013, 85—87).

Concerning corporate morality, Australian researchers Farrell, Cobbin, and Farrell (2002)¹⁶ found that company ethical codes do not have a significant impact on employee behavior; in practice what influences them is “the prevailing morality of society rather than of their workplace” (Simpson and Taylor 2013, 48). What will set the tone or culture of an organization is what is known as “the tone at the top”; that is, the ways in which the top management of an organization creates an ethical or unethical atmosphere within the organization (p. 51). It is well established that the tone at the top impacts employees’ own morality. An abundance of detailed guidance and guidelines for management exist regarding how the right tone from the top can be created and maintained.¹⁷ As mentioned at the start of the chapter, the responsibility of corporations to contribute to sustainability and human rights at home and overseas has been on the agenda for at least the last three decades.