Organizational Ethical Climate



Organization ethical climate is a shared belief which defines what acceptable behavior is and how an organization can handle ethical issues when they arise, more so it defines the moral framework in the organizational working environment and level of ethical practices (Arnaud, 2010). More precisely, organization ethical climate looks into employees shared understanding about company rules, exercises such as tradition, methods, and routines, and methodologies; its main focus is on ethical decision making and actions (Arnaud, 2010). Important organizational events such as employees job satisfaction, job turnover, and employee’s commitment have relationship with ethical climate (Penn State, 2016). Through a careful research carried, organization ethical climate is important to an organization but can be a subject of biases which can affect our moral decision-making processes. 

Organization ethical climate is important because it serves as a catalyst for trust between the management, the peers at work and to the organization’s clients. It is important because it impacts behavior, motivates employees, enriches employee morale, improves organizations commitment, promotes employee involvement and reduces employee turnover (Penn State, 2016). Organizational ethical climate can serve as a job performance indicator and driver and psychological well-being of the company’s human resource and clients. When organizational ethics climate is caustic and destructive, it can cause an increase in cases of unwanted behaviors, withdrawal and dysfunctional. 

Ethical decision making in an organization often involves individuals and other stakeholders who analyze a situation in order to come up with important results (Penn State, 2016). However, cognitive biases affect moral decision making and as a result, leaders end up making a biased decision. The moral decision-making biases include; Status Quo bias which refers to making things to remain in the current state despite the high possibility that better results can be achieved by making changes. Loss Aversion bias arises when losses are given more weight than the gains made and therefore stronger dissatisfaction as compared to satisfaction. Risk Aversion bias is as a result of overlooking an option that is less certain with more outcome value as compared to an option that is certain with less outcome value. Omission bias arises when the same outcome brought by an act or an omission whereby outcome by an action is considered worse than outcome caused by an omission. Nature bias is as a result of a perception that a harm caused by natural substances is less harmful as compared to the harm of the same impact caused by artificial or manufactured substances. Such cognitive biases are most likely to influence moral decision intuitions which may take inclined positions when moral decision-making biases debates arise (Ciulla, 1998).

Ethical dilemma example

The GK Motors developed a new family car model Version Z which had unique features that out-do other competitor’s cars present in the market. The marketing team research showed that the car will be very competitive and will drive high market demand if it is priced at $. 10,000. However, a research by the company showed the possibility of the car suffering an electric fire after being in service for more than two years; the possibility stands at 1:50 000, and under some circumstances the occupants of the vehicle might not be able to escape with a possibility of 1:1 000 000.

Thomas Jay, the Managing Director of the GK Motors asked the research and development team to come up with a solution to the problem. The R & D team come up with a suggestion of using electrical materials of higher quality, but by adopting the suggestion the production cost will be increased to $. 12,500 -a price which will not easy to sell it- but the possibility of electric fires will be reduced to 1:5 000 000.

Mickey Motors, GK Motors main competitor is in an advanced stage to launch new models which resemble GK Motors Version Z model. Information received from the market indicate that Mickey Motors car model has the same electrical faults that can lead to electrical fires just like GK Motors Version Z model. However, Mickey Motors is going ahead with production irrespective of the faults discovered in their car model.

Thomas needed to make a quick decision in order in order to beat the competitor in the market with the product. GK Motors need to review its option; if it goes ahead and manufactures Version Z model without doing any modification it will be able to capture the market through the first mover advantage. However, after two years GK Motors may suffer legal claims arising from people suffering from injuries or even deaths caused by the car faults, on the other hand, if GK Motors go ahead and manufacture modified Version Z model it will lose the sales to Mickey Motors who will be introducing their model at a cheaper price and thus have pricing advantage.

GK Motors Marketing Manager convinced Thomas to go ahead and launch the Version Z model without any modification so that the company can have a competitive price model and also because the products from both companies had the same nature of risk. More so, the model had been authorized by the government researchers who did not discover the electric faults and are also not aware of the findings of the Version Z model done by the GK Motors researchers. The Marketing Manager also believes that it is the buyer’s responsibility in checking on the suitability and the quality of goods before purchase as stated by the doctrine of caveat emptor. However, the Deputy Managing Director is of different opinion whereby he believes that GK Motors has a moral obligation and should not launch the product without making the suggested modifications. He also believes that the company will benefit in the long-run for adopting a policy that supports corporate social responsibility. 

The Director for Finance advised that; with all the resources the company has invested in the project, abandoning it could make the company ending up being declared bankrupt or being taken over within one year. He convinced Thomas to go ahead with launching Version Z model as Mickey Motors is also launching its own model. More so he advised Thomas to destroy the research information that showed faults in the Version Z model as financial demands should overcome long-term ethical issues and reputational considerations.

Thomas Jay, the Managing Director of the GK Motors did not act ethically by launching Version Z model. Thomas should have disclosed the research findings to the government researchers about faulty electrical appliances in the Version Z model, furthermore, he could have disclosed Mickey Motors on ethical disclosure code called whistle-blowing. Thomas did not consider the ethical principle of beneficence which depicts that beneficence action should be taken to prevent other people from harm and also to improve their situation (Arnaud, 2010). By considering launching modified Version Z model and whistle-blowing to prevent Mickey Motors from launching faulty model, harm against the consumers of the car model would be averted. The respect for person principle should have also been considered by GK Motors. The principle calls for respect and protection for autonomous agents and persons with less autonomy; which in this case are the people who will purchase the faulty car models (Arnaud, 2010).

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The ethical climate is a perception and beliefs of an organization as it determines what’s wrong or right (Ciulla, 1998). It is derived from an organization governance, norms, values and habits that prevail within. Company’s leadership and history determine organization’s ethical climate. More so, the poor ethical climate is as a result of bad ethical practices by the top company’s management or leadership (Ciulla, 1998).

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  1. Arnaud, A. (2010). Conceptualizing and Measuring Ethical Work Climate: Development and validation of the ethical climate index. Business & Society, 42(2), 345-358.
  2. Penn State University, (2016). PSY 533 Lesson L13: Ethical Climate
  3. Ciulla, J.B (1998). Ethics, the heart of leadership. Westport, CT: Greenwood.
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