The corporate culture of a company influences its stakeholders’ moral judgments. A strong corporate culture is essential in influencing employees to act and speak honestly. The characteristics of a company’s culture determine the nature and quantity of business that it attracts. There is a strong correlation between corporate culture and the ability of a company to increase its market share. Customers are happier and more confident when dealing with a company that upholds high levels of integrity. Culture is not only essential in winning customers but also helps retain top talent employees within the organization (Smimou, 2020). Reducing employee turnover assists companies in reducing costs associated with hiring. A good corporate culture rewards employees for their hard work, and hence they feel satisfied working with the company. Investors associate good work ethics with a moral corporate culture because they are assured that their funds are protected. Moral corporate culture matters when a company is trying to access funds from the money markets. Developing a moral corporation is essential for the growth and sustainability of a company through creating customer loyalty, employee satisfaction, and stakeholders’ confidence.
Case for Moral Corporate Culture
The general public has become aware of the moral responsibilities of a company. They expect companies to uphold high moral values and work in the best interest of all stakeholders. “Immoral” companies could face harsher punishments because of the increasing detest for dishonest behavior in society. Governments have passed stricter regulations on companies that breach laws, especially after the financial crisis of 2008 (Shaw, 2021). The public is knowledgeable due to social media, and they can scrutinize companies for any unethical dealings. The attention on corporate culture necessitated the discussion on the moral responsibility of corporates. The ethical commitment extends beyond what is under the company’s control to account for actions that may harm society. Therefore, moral responsibility also covers the dimension in which companies could be blamed for their actions.
For example, the Gulf of Mexico’s oil spill was blamed on a company and actions taken against it. Shaw (2021) suggests that the dimension of responsibility for harmful effects considers companies as legal entities expected to have moral values. Such consideration matters for companies because they must create a culture that reflects the values of the organization. The challenge is that sometimes individuals representing the company can act against the company’s moral values because they don’t face the same reputational risk as the company. However, the argument of considering a corporate as a moral person implies that organizations must have a strong moral culture that binds all stakeholders.
Individual actions determine the culture of corporations. The actions of a firm are a sum of the actions of various stakeholders within the organization. The moral agency problem arises because the company is responsible for the individual’s actions, but no individual is liable for the company’s actions. According to Smimou (2020), the agency problem is central to the discussion of corporate moral responsibility. The lack of accountability on the individual’s part implies that people can hide behind corporate responsibility to harm society. For example, the 2008 crisis was created by the greed of individuals acting for some financial institutions. Unfortunately, the individuals could not be held liable because the companies were penalized as corporate entities. The moral agency problem provides another reason why companies should focus on creating a solid corporate culture. Corporates must create a culture aligned to their values to reduce individuals’ chances of pursuing their self-interests (Gillin, 2020). A corporate moral culture aligns the individual’s interests to the company’s objectives so that stakeholders can find purpose in what they do. Besides, companies could employ their moral compass in all internal processes like hiring to ensure the right people join the company.
The decision structure of the organization shapes the acts of an individual within an organization. It is assumed that companies give employees responsibilities and instructions that guide them on operations (Keneley, 2020). Individual action is linked to the company’s objectives, and hence the company is responsible for its actions. Over time, governments and scholars worldwide analyzed the relationship between individual actions and companies’ moral responsibility. The firm’s operational mechanisms determine the dimension within which the instructions of the company bind an individual. Specifically, leaders within the organization and critical decision-makers have the freedom to decide compared to junior workers. The corporate culture is important in aligning corporate moral behavior with individual behavior representing the organization.
The case for leaders highlighted that the moral responsibility of companies and individuals is not mutually exclusive. According to Sendlhofer (2020), the decision structure argument assumes that the company’s decisions and the individual decisions cannot be separated. However, the individual decisions are linked to the corporate culture only if the individual can prove that they acted in the company’s best interest. Companies can separate personal moral responsibility from corporate culture if they work against laid procedures and policies. Moral corporate culture is critical in ensuring that ethical standards guide individual actions to avoid confusion. A transparent corporate culture helps to distinguish behavior that is outside the norm and compel individuals to comply.
Corporations are responsible for their moral culture because they are ethical agents with freedom of choice despite the shareholders’ objective to maximize profits. Corporations make decisions regarding their operations and communicate the decision to stakeholders. The corporation is a separate entity distinct from its owners. This implies that the individual and the company are all responsible for the different aspects of their moral behavior. Therefore, there is no responsibility deficit regarding the ethical standards of the company. This argument provides a mechanism for reinforcing the resolve of companies to guide their corporate culture. The individuals working in an organization have no excuse for not adhering to the company’s ethical standards. It is the top management’s responsibility to guide the employees so that none is unaware because of their inaction. Organizations should develop a corporate culture to protect the employees from the legal implications of unethical behavior.
The application of the shared agency of groups could be applied to support corporate moral culture. A group of individuals is bound by the collective decisions that they make. Besides, the group is bound by their commitment to specific policies and procedures considered the group intention. It is possible to have group intentions that are not aligned with the members’ individual objectives (Keneley, 2020). However, this does not mean that the individuals will not be tied to the group decisions’ implications. Similarly, amoral corporate culture governs the individual actions within the organization. The corporate entity must own the corporate culture knowing that some individuals within the organization may not agree with its values.
Applying Moral Corporate Culture in Organizations
The individuals within an organization are morally responsible because they are agents with choices. Companies could be held morally accountable for the actions of the individual because they can choose between good and wrong actions. Corporates can be compared to individuals when it comes to making normative decisions. Secondly, the organization can gather information regarding the implications of its findings for all stakeholders. The company is a corporate agent because it can make informed judgments by weighing various alternatives. Lastly, the organization is responsible for its corporate culture because it has direct control of its choices. The three conditions suggest that the organization has an individual’s freedoms and should be considered an agent concerning its values and attitudes.
The corporate moral culture is the voluntary commitment of all stakeholders to the company’s rules beyond government rules. The public well perceives the moral culture, and companies can use it to influence their marketing campaigns. The commitment to what is regarded as a positive corporate culture improves the reputation of the company. The use of corporate culture has encouraged criticism from the public and governments. Moreover, it could be used as a marketing tool that has reduced the impact that a moral culture can have. Some companies develop an ethical corporate culture not out of ultraism or love for the public good but as marketing tools (Sendlhofer, 2020). This is one of the arguments that criticize the corporate moral culture. However, the argument doesn’t consider that an ethical corporate culture benefits society regardless of its objective. For example, a company committed to reducing harmful gases to the environment reduces harmful emissions to the environment regardless of its reason.
The moral corporate culture assists in shaping three aspect areas of an organization. One, it shapes the company’s internal processes that the public is not aware of, hence shaping the company’s ethical dimension from the inside. Secondly, the culture influences the middle area that affects the environment and the public in the company’s regular operation. The corporate moral culture influences the company’s external area covering actions aimed at having a positive impact on the environment and the public. The three aspect areas help companies overcome the perception that a corporate moral culture is a marketing tool (Charness & Grieco, 2020). They allow a company to develop an inclusive culture and cover all the different aspects of the business.
The internal processes of a company entail the different procedures outside the public’s view that determine the quality of the products and services. The internal area influenced by the corporate moral culture encompasses all the processes and procedures defined by the corporate strategy. The corporate strategy is a set of targets and objectives that the executive determines to influence internal decisions in line with the company’s long-term strategy. The executives’ long-term decisions are translated into short-term goals that define the operational choices of managers and workers. The executive corporate strategy is the nature of the company’s growth and the organization’s responsibility to the market in terms of profitability, partnerships, and planning (Thakor, 2020). The corporate moral culture is supposed to guide the executive and leaders in this decision. The corporate moral culture is critical in this stage because it’s not visible to the public for scrutiny. Without embracing a corporate culture, the company can devise ethical standards and Corporate Social Responsibility strategies that are not supported by the business’s internal functions. For the corporate moral culture to be visible from the outside, supportive internal processes must be guided.
The middle area affected by the corporate moral culture can be defined as all the processes that affect society and the environment. Wang (2020) argues that the area analyzes the effects of the company’s actions that could be measured directly or indirectly. For example, the middle area includes the impact of the company’s operations in terms of CO2 emissions and the employees’ work environment. It also provides for the management of the supply chain along with other stakeholders. Supply chain management assumes that a company is likely to trade with companies with the same moral culture. A company that deals with companies with questionable ethical cultures put its culture into question (Thakor, 2020). The impact of moral culture on the middle area is complex for multinationals because of their numerous operations in different regions. The middle area has an impact on stakeholders because of their interest in the performance of the company.
Different stakeholders within the organization have varying interests in the corporate culture of the organization. Employees need a corporate moral culture that creates a good working environment that rewards them for their efforts. Employees expect clear communication of career progression policies and the terms of their contracts (Gillin, 2020). A corporate moral culture towards employees reduces conflicts between trade unions and the management. The owners of capital expect the success of a company that is built on sustainable strategies. Corporate culture helps companies in selecting honest investors who won’t damage the reputation of the company (Sendlhofer, 2020). Moral corporate culture is essential for customers because they have confidence in a company that informs them of the internal processes. Customers are interested in the product from its origin at suppliers of raw materials to the end. For example, chocolate companies suffered reputational damage when customers realized the illegal practices of coca farming, which is an important raw material in chocolate production (Shaw, 2021).
The external area covered involves strategic steps to assume social responsibilities outside the operations of the company. Corporate moral culture could guide companies in making contributions to the public (Smimou, 2020). It could help companies avoid strategies like donating some part of profits from the sale of products that are often translated to increased sales. Corporate moral culture could help companies define influential sponsoring events that are not perceived as marketing campaigns. Moral corporate culture is important when participating in social activities. Moral corporate culture is critical in adding value to the contributions that a company makes to society.
In summary, there has been an increased expectation from companies to be part of society. Companies benefit from the community and owe the public their success. Moral corporate culture is a new way company become sensitive to the affairs of humanity. The new culture challenges established norms of viewing corporate responsibility as a marketing strategy. Moral corporate culture is about building organizations whose values and attitudes are aligned with society’s objectives. In this regard, corporates are responsible for developing a corporate culture that is in line with society’s expectations. Companies with a positive corporate culture can build on it to drive sales and customer loyalty. However, this does not mean that companies should commit to corporate moral culture as a marketing strategy.
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