Management of Ethical Behavior and Organizational Culture: Case Study


Ronald (1992) points out the need for encouraging ethical behavior in organizations, through the use of an effective organizational culture. Nevertheless, the author notes that there is no linkage between objective and quantitative performance in an organization and morality. Many authors admit that practicing unethical behavior is costly to organizations. Ethical/unethical behavior can be implanted into the organizational culture, since the latter depicts shared values and beliefs that offer members with rules on how to behave (Mathis & Jackson, 2008). Of great importance is the fact that these behaviors can be managed and modified in order to benefit an organization in future.

Case Study

Mid-Atlantic Coca-Cola Bottling Company and Allegheny Pepsi bottling were involved in wars of competition in the 1980s. The companies, however, decided to end these “cola wars” in 1982, through setting of wholesale prices for the commodities they dealt with. This setting of prices affected Virginia and Maryland states. Investigations into the issue revealed that then former Allegheny Bottling Company chairman, by the name of Morton, had participated in the scheme. The president of the competitor Mid-Atlantic Coca-Cola was also a party to these unethical practices. They were found guilty and imprisoned by the court (Hicks, 1988).

Although it is impossible for a company to be punished through imprisonment, Allegheny Bottling Company was also imprisoned in the judgment, but the penalty was converted into restrictions on the company’s operations. The company had allegedly benefited with $10 million from the price fixing deal. In fact, in his decision, the judge thought that he could not award a $1 million fine to the company, having benefited with a larger amount of money than that.

In addition, four senior officers of Allegheny Bottling were also ordered to perform community service for two years on a full-time basis for participation in the unethical behavior. Also, among those found guilty were two managers from Allegheny Company. Further, four employees were required to perform community work as punishment for participating in the illegal practice (Hicks, 1988).


Ethical behavior is generally defined as being what is wrong or right in a particular setting (Ronald, 1992). Unethical behaviors are common with both small and large organizations. It is estimated that two-thirds of the America’s 500 biggest firms have participated in illegal behavior in one way or another (Gellerman, 1986). Unethical behavior has been found more dominant among employees or company staff than among customers, according to the author. This is clear in the case of two soft-drink sellers discussed above.

As far as the definition of what constitutes ethical and unethical behavior, clear-cut answers are not always obvious, and this is a major challenge to ethics. Mostly, ethical judgments in organizations are associated with the environments in which the organizations operate in. It is considered unethical behavior to fix prices for a commodity as done by Mid-Atlantic Coca-Cola and Allegheny Bottling Company since it is against codes of practices of business such as fair competition.

Organizations may encourage and nature ethical or unethical behavior and entrench it in their organization culture through proper or poor management of employee behaviors through necessary strategies, such as training (or lack of it) for good ethical behavior and engaging employees in developing an ethics code or standards of conduct as can be seen in the Cisco case (Mathis & Jackson, 2008).

Organizational culture that supports ethical practice is important to helping the organization commit to ethical practices, since it is engraved in employee behavior. However, companies such as Mid-Atlantic Coca-Cola and Allegheny Bottling Company participated in unethical practices, not because they had no ethical codes of conduct, but because it was not engraved into their organizational culture.

Organizations must ensure that employees are trained on positive behavior and made to understand the need for ethical practices in the firm, and participate in making ethical decisions. Participation of employees makes it necessary to entrench a culture of good ethical behavior. Firms must also learn to reward positive behavior and punish unethical behavior in order to discourage unethical behavior while encouraging ethical practices among employees. These practices ensure that ethical behaviors become part of the employees’ way of life at the workplace. These were not emphasized in Mid-Atlantic Coca-Cola Allegheny Bottling Company, although some efforts had been made by the companies to commit to ethical practice.

It can be seen that top leadership at Mid-Atlantic Coca-Cola Allegheny Bottling Company had a great role in the unethical practice and influenced even the middle level managers to participate in it. Leadership and managerial styles are very influential in managing ethical/unethical behaviors in organizations. Managers may encourage unethical behaviors in relatively a number of ways, including adopting a way of thinking which is susceptible to unethical practices (Wolfe, 1988).

Sometimes, organizations reward and accept practices that are morally questionable and unacceptable or those that violate the company’s ethical standards, and/or punish behaviors such as whistle blowing for unethical practices by leaders (Ronald, 1992). It must be noted that leaders are role models to employees and Ronald (1992) and Nielsen (1989) admit that managers influence lower level employees on how to act when faced with ethical dilemma. For instance, middle-level and lower level management at Mid-Atlantic Coca-Cola Allegheny Bottling Company might have seen nothing wrong to participate in price-fixing when their bosses were already supporting the idea.

All of the aforementioned compromising and unacceptable practices by managers may seek to encourage and train employees towards unethical behavior. This has been regarded as development of counter norms by organizations, where they accept those practices which are against the prevailing ethical standards. These norms are gradually accepted as the organizational culture and conveyed even to new members.

Organizations tend to poorly manage poor ethical behavior by capitalizing on what has been referred to as bottom-line-mentality, and therefore fail to edge unethical behavior in the culture. This is where they regard financial performance as the only sound evaluation to all thinking, decisions and actions by employees and management, even when these actions and behaviors have far-reaching ethical implications (Ronald, 1992).

This inclination makes it necessary to ignore rules of morality. This is well exemplified in the case of Allegheny Bottling Company which could have made the decision on price-fixing based on the fact that they were set to gain financially (with about $10 million). Mid-Atlantic Coca-Cola was also set to achieve financial benefit in one way or the other. Both companies neglected the morality/ethics of their activity.

Another way through which organizations may foster unethical behavior is when managers encourage use of exploitive mentality. It is a view leading to a situation where empathy and compassion are undermined while promoting stereotypes. In this case, managers may want to make their actions appear as ethical rather than being concerned about their moral legitimacy. They concentrate on convincing the public that the action is right because they believe that it is right when the public gets convinced it is. They justify actions aimed at hiding unethical practices, for example.

Ethical or unethical behavior come to be engraved in organizational culture because it is a shared understanding of what behavior is acceptable and ethical, and which is not. Therefore, through training, employees can be made to accept ethical culture. A company must emphasize the need for employees to always act ethically based on a number of principles, including having a sense of social responsibility, need for keeping personal morality, sustaining friendships, and observing professional codes among others (Hunt, 1991; Ronald, 1992).


Organizations can entrench ethical behaviors in the organizational culture through various means. These include training and encouraging positive participation of employees in building effective ethical cultures and standards of practice.

Through leadership, organizations can contribute to the growth of unethical behavior in organizational culture by rewarding or accepting unethical behavior among employees. In addition, other practices that may result in unethical behaviors being part of the company culture is punishing corrective behavior such as whistle blowing by employees on unethical cases by other employees and over emphasis of the company on financial rewards such that it overlooks morality issues in decision-making. This has been exemplified in the case of Allegheny Bottling Company which benefited through price-fixing with a competitor company named Mid-Atlantic Coca-Cola.


Gellerman, S. W. (1986). Why “good” managers make bad ethical choices. Harvard Business Review, 64, 85-90.

Hicks, J. (1988). Corporate prison term for Allegheny Bottling. New York Times.

Hunt, J. G. (1991). Toward a leadership paradigm change. Newbury Park, CA: Sage.

Mathis, R. L., & Jackson, J. H. (2008). Human Resource Management (12th Ed.). South-Mason: Western Publishing Company.

Nielsen, R. P. (1989). Changing unethical organizational behavior. Academy of Management Executive, 3(2), 123-130.

Ronald, S. (1992). The challenge of ethical behavior in organizations. Journal of Business Ethics, 11(7), 505.

Wolfe, D. (1988). Is there integrity in the bottom line? Managing obstacles to executive integrity. In S. Srivastva (ed.), Executive Integrity: The Search For High Human Values in Organization Life (140-171). San Francisco: Jossey-Bass.

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