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The function of developing and implementing business ethics in an organization is difficult. Due to each organization's culture and atmosphere being different, there is no clear or specific way to implement a code of ethics in an existing business. Business ethics implementation can be categorized into two groups; formal and informal measures.
Business ethics refers to contemporary organizational standards, principles, sets of values and norms that govern the actions and behavior of an individual in the business organization. Business ethics have two dimensions, normative business ethics or descriptive business ethics.
Researchers have developed models for understanding an organization's culture or developed typologies of organizational culture. Edgar Schein developed a model for understanding organizational culture. He identified three levels of organizational culture: (a) artifacts and behaviors, (b) espoused values, and (c) shared basic assumptions.
Stakeholder theory is a theory of organizational management and business ethics that addresses morals and values in managing an organization. It was originally detailed by Freeman in the book Strategic Management: a Stakeholder Approach, and identifies and models the groups which are stakeholders of a corporation, and both describes and recommends methods by which management can give due ...
Organizational culture refers to culture related to organizations including schools, universities, not-for-profit groups, government agencies, and business entities. Alternative terms include business culture, corporate culture and company culture. The term corporate culture emerged in the late 1980s and early 1990s.
In social exchange theory the effect of ethical leadership on followers is explained by transactional exchanges between the leader and their followers. The leader's fairness and caring for followers activates a reciprocatory process, in which the followers act in the same manner towards the leader.
Ethical codes are adopted by organizations to assist members in understanding the difference between right and wrong and in applying that understanding to their decisions. An ethical code generally implies documents at three levels: codes of business ethics, codes of conduct for employees, and codes of professional practice.
The theories of organizations include bureaucracy, rationalization (scientific management), and the division of labor. Each theory provides distinct advantages and disadvantages when applied. The classical perspective emerges from the Industrial Revolution in the private sector and the need for improved public administration in the public sector.