Organizational Ethics Research Paper

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Organizational ethics is the applied ethics discipline that addresses the moral choices influenced and guided by values, standards, principles, rules, and strategies associated with organizational activities and business situations. Organizational ethics focuses both on the choices of the individual and the group. Since antiquity, the moral features of commercial activity mandated a code of ethics to ensure virtuous decision-making and preserve the common good. Considered a companion to business ethics and practical ethics, organizational ethics began in the West in the early 1980s as a direct result of the compliance movement. A decade later it was a response to a need in healthcare. Similar to bioethics, the literature addressing organizational ethics is multidisciplinary. The global dimension of organizational ethics is poised to be a high priority in the coming decades. An organization that conducts business in other countries is becoming the norm thus requiring an awareness of the transcultural value implications of decisions and practices. From a global perspective, this entry focuses on the dimensions of an organizational culture, approaches to ethics management, the role of individual moral responsibility, the widening scope of multinational corporations with global stakeholders, and the need for global best practices in organizational ethics.


An emerging field, organizational ethics focuses on the study and practice of the ethical behavior of organizations. Though intertwined in the domain of moral philosophy, organizational ethics can be distinguished from both business ethics and practical ethics. First, the scope of business ethics normally focuses on corporate governance with intellectual roots in corporate social responsibility and is explicitly devoted to the relationship between commerce and ethics. Practical ethics, on the other hand, is considered a linking discipline seeking to bridge theory and practice. It reflects on the application of philosophical principles in the face of concrete dilemmas to confront competing moral principles, e.g., loyalty and truth. Practical ethics will go further than just moral reasoning and seek to clarify moral perception, the ability to recognize an ethical issue in a complex set of circumstances, and to emphasize moral character, the disposition to live ethically in a coherent way over time.

Broadly speaking, organizational ethics is concerned with standards and principles for human behavior within an organizational structure to avoid harmful behavior and to promote those behaviors that ensure an ambiance of fairness, trust, honesty, and respect. The common ground that organizational ethics shares with business ethics and practical ethics is the pursuit of what is right and just.

History And Development

Although the nascent field of organizational ethics can claim only 40 or 30 years of ongoing research and development, the study of ethics spans centuries. In antiquity, the transactions of the market-place and activities related to commerce fell under the scrutiny of philosophy or law leading to the establishment of codes of conduct. The famous Code of Hammurabi (1700s BC) designated prices and taxes as well as delineated rules of commerce and fierce punishments for noncompliance. The province in China in which Confucius (551–479 BC) served as minister of justice became famous for the honesty of its people, the respect given to the aged, and the care of the poor. The single word “reciprocity” (what you do not want done to you, do not do to others) became the overarching principle of Confucian ethics.

In the Judeo-Christian moral perspective, the Ten Commandments (Exodus 20:2–17; Deuteronomy 5:6–21) and the Talmud (200 AD) include moral rules governing right conduct in commercial affairs. The Greek philosophers Plato and Aristotle in the fourth century BC held that the life of virtue is rewarding for the virtuous as well as beneficial for the community. Their emphasis on personal virtues involved a set of standards for fair and courteous treatment of one another. Specifically, Aristotle proposed to the soldiers, merchants, and statesmen of Athens the 14 standards of Nicomachean Ethics that include being honest, gentle, courageous, proud, truthful and living temperately to reduce conflict and to increase trust and cooperation between the groups in Athenian society.

The writings of the Vedas assert an ethical element to life in that there is a law of life given by the Creator to human beings. According to Vedic writings, there are eight virtues that sustain the world of which truth is the noblest. The ethical exhortations of other cultures provide similar moral contours for rightful behavior in dealing with others.

In the West, Roman law extended to the far ends of the empire that included Europe, North Africa, and the Middle East. For 1500 years, Roman law inscribed on the famed 12 Tablets reigned in a sacred manner since “custom” and law were interchangeable thus requiring practice to be the same way for all. In this religious context, the power of Roman law persisted despite the changes made to both their gods and their legal system. Most supreme was the concept of an “ideal” ordering of nature, to which human justice was supposed to mirror as closely as possible. In 529, the Eastern Roman or Byzantine Emperor Justinian ordered the collection of Roman law and legal scholarship into what is now known as the Code of Justinian. This work was the legal code of the Byzantine Empire for nearly a millennium. The legacy of Justinian’s code forms the basis of what is now called civil law. Although civil law codes differ from nation to nation the framework of its legal theory remains the same as it existed in the Roman Republic.

For the following centuries until the Enlightenment, Christianity influenced ethical thought in the West. The most prominent theologian Saint Augustine of Hippo (354–430 AD) asserted that honesty, truthfulness, and temperance are not sufficient to produce the common good. In his work entitled The City of God, Augustine proposed that the members needed to act with a significant degree of compassion and kindness to form a truly “good” society. This call for compassion and kindness is best expressed in the Golden rule which is not limited to the Judeo-Christian tradition but forms an integral part of all world religions.

Likewise the quest in moral philosophy has been the search for an ideal rule decision not the analysis of human behavior resulting from the use of this decision rule. Therefore until recent time, Western moral philosophy was mostly theoretical with some applied concepts. Although the ideal rule decision or a “first principle” has not been articulated, a standard of rightful behavior for individuals and groups is described as voluntary disinterestedness. The use of multiple alternative decision rules or principles that provide different perspectives or views of moral problems are applied sequentially to gain fuller understanding and insight on applying this concept of voluntary disinterestedness. Each of these perspectives or principles from the classical ethicists to modern moralists proposes that a “good” person should not act solely for his or her short-term gain but for a “mixture” of that gain together with a vision of the future (Protagoras c. 490–420 BC), self-worth (Aristotle 384–322 BC), the goal for the community (Augustine of Hippo 354–430 AD), the fear of retribution (Thomas Hobbes 1588–1679), the understanding of universal moral duty (Immanuel Kant 1724–1803), the recognition of individual rights (Jean-Jacques Rousseau 1712–1788 and Thomas Jefferson 1723–1846), or the calculation of social benefit (John Stuart Mill 1806–1873).

This listing of attributes can be extended to the contemporary contributions of the distributive justice of John Rawls (1921–2002) and the contributive liberty of Robert Nozick (1938–2002) each of which takes into account the valid self-interests of others. Moreover, in the era of moral pluralism, this crucial query has evolved into how can a person combine the rights and interests of another with his or her own instead of substituting those rights and interests for his or her own (Hosmer 1995). In the absence of clear rules of how to accomplish this moral duty and/or standards and principles that delineate the percentage or ratio of the mixture between different rights and interests, the question remains: how disinterested (or virtuous) does a person have to be to recognize and protect the rights and interests of others?

Philosophical moral inquiry has produced and continues to generate a rich discussion on the topic of the good, right, and just behavior. However, on the practical level, the scope of law and governmental regulations requiring compliance to ethical standards heralded the birth of organizational ethics in the USA (Iltis 2001). In the 1970s, similar to the field of bioethics which began due to scandals and as a response to eliminate harm and protect the human person, the birth of business ethics parallels closely with a wave of serious scandals at the national and international business and governmental level: corruption, negligence, waste, abuse, fraud, disregard for the interests of employees, misappropriation of funds, conflict of interest issues, and serious erosion of public service ethics. The loss of trust ushered in a new era that was explicitly devoted to ethics in organizations.

Organizational ethics is viewed as the second stage in the development of bioethics as a bridge to transcend the casuistic framework of clinical bioethics, based on the patient as an individual, and focus attention on how the structure and functioning of healthcare organizations engages ethical problems or causes new ones to arise (Potter 1995). In the US healthcare sector, organizational ethics first appeared in the 1990s as a result of the combination of several factors such as the growth of managed care, the failure to implement a national health plan, the influence of business ethics, and the redundancy of the traditional Ethical Committee model. In 1995 the Joint Commission for Accreditation of Healthcare Organizations (JCAHO) added new standards to the Accreditation Manual that dealt with organizational ethics and thus effectively initiated this new branch of bioethics.

Another analysis of the origins of organizational ethics places the beginning a decade earlier with the conclusion that there is a close link between the development of organizational ethics and the compliance movement of the weapons industry in the early 1980s (Giblin and Meaney 1998). In the USA many large federal contractors had used comprehensive codes in response to strong pressure by the federal government to take greater responsibility for preventing illegal conduct by their organizations. By the late 1980s, the US federal government took a number of steps to pressure private corporations and other nongovernmental organizations to put in place comprehensive compliance-based ethics programs (Roberts 2009).

Basically, the tenet of getting ethics into all daily decision-making and work practices (Purcell and Weber 1979) provided the fulcrum of a moral obligation expressed in the word “compliance.” The swift adoption of compliance-based ethics programs by governmental and nongovernmental organizations can be understood as the result of the gradual realization that they could offer considerably more advantages than integrity-based programs. The criticism of compliance ethics systems has identified a salient weakness in that they leave little room for individual conscience or decision; they do not inspire employees to deal with the full range of issues that confront individuals in governmental and nongovernmental organizations. Compliance programs provided a minimum ethical requirement: this was not enough. A more robust strategy would be to hold organizations to a standard of integrity (Paine 1994). Compliance focuses on avoiding legal sanctions whereas organizational integrity shifts the emphasis to self-governance in accordance with values and principles. Codes of conduct regulating behavior have become a necessary part of the vast majority of an organization’s operating procedure to ensure a positive reputation and maintain a cutting-edge advantage.

In the early 2000s, the corporate fraud and corruption defined by high-impact scandals of large American industries (Enron, Arthur Andersen, Worldcom, Tyco, and HealthSouth) came to light and captured the world’s attention. Very soon, though, it became evident that other countries, the Dutch firm Ahold and Italy’s Parmalat, joined the center stage of ethical wrongdoing with their own versions of corporate scandals (Carroll 2004).

With the rise of globalization comes the demand for a broader understanding of transnational values and the cultural parameters of social responsibility, the need to establish credibility with multinational stakeholders, the implementation and sustainment of a set of universal ethical guidelines that developed countries can apply in their transactions with developing countries, and a framework for global codes of conduct to serve as best practices. These are the contemporary tasks of organizational ethics in a global context.

Conceptual Clarification

The term “organizational ethics” is a broad and dynamic concept comprising ethical climate, levels of trust, moral awareness, and ways of acting that ensure that a shared set of values that promotes the common good becomes the prevailing culture of the group. The term is currently used in diverse sectors, e.g., healthcare, business, public service, governmental agencies, and education with each placing an emphasis particular to their nature.

Therefore, a basic definition of organizational ethics would be as follows: the ethical study of everyday practices in which organizational values described as fairness, compassion, integrity, honor, and responsibility are manifested in organizational structures and behaviors.

The first attempt to define the scope of organizational ethics would be as follows:

… institutionalizing ethics may sound ponderous, but its meaning is straightforward. It means getting ethics formally and explicitly into daily business life. It means getting ethics into company policy formation at the board and top management levels and through a formal code, getting ethics into all daily decision making and work practices down the line, at all levels of employment. It means grafting a new branch on the corporate decision tree — a branch that reads “right/wrong” (Purcell and Weber 1979, p. 6).

This definition highlights both the urgency and importance of understanding the need to develop a long-term plan for an organization’s ethical viability. In the moral realm, organizations may be compared to people in that an organization functions as a moral agent that can be held accountable for its actions. Since the term “organizational ethics” specifies that the practice of ethical behavior occurs throughout the levels of an organization, some researchers define both terms in a relational manner.

An organization is generally defined as a group, in number from two people to tens of thousands, that intentionally aims to accomplish a shared common goal or a set of goals. In order to achieve shared goals, an organization acts as a system composed of inputs (resources–human and monetary); processes (strategies to accomplish goals); outputs (products and services); and outcomes (end results or benefits to consumers). The ethic of an organization refers to an organization’s active attempt to define its mission and core principles, to identify values that may cause tension, to seek best solutions to these tensions, and to manage the operations that maintain its values.

For many researchers working to clarify roles within an organization, the mantra of “ethics starts at the top” holds firm. It is reasonable to require that the task of ethics management involves leadership personnel to initiate the inclusive process of defining an organization’s guiding values, to create an environment that sustains ethically sound behavior, and to instill a sense of shared accountability among employees (Paine 1994). This conceptual understanding focuses attention on the downstream effects of an effective organizational ethics action plan to include but not limited to policymaking, moral awareness, moral distress, ethical climate, trustworthiness, compliance, integrity, self-evaluation, and measures to assess corporate social responsibility in maintaining the common good. In order to engage in the realm of ethics, an organization’s task is to develop both short-term and long-term goals and programs that support and nurture ethical behavior at all levels of employment.

In theory, all members of an organization play a part in the presence or absence of a robust ethical climate. Their stake in holding on to ethical values that go beyond simply avoiding corruption and limiting the harm of ethical wrongdoing assumes primary importance as a present and future challenge in the practical pursuit of organizational ethics. Trust is by far the most significant factor in an organization’s culture and the indication of its ethical health. Can we trust governments and their multiple agencies to regulate with proper caution and act in the public interest? What programs and initiatives can hold organizations ethically accountable since the litany of twentieth-century scandals suggests that untrustworthiness is widespread? These are common questions requiring responsible answers. Fundamental ethical obligations, notably the rejection of coercion and deception, set demanding standards for all stakeholders. Their embodiment in law, regulation, public policies, institutional practice, and professional standards is the foremost way of improving trustworthiness (O’Neill 2002). The quest for trustworthiness is the moral compass for both bioethics and organizational ethics.

Dimensions Of Organizational Culture

The nature of any organization involves relational activities with customers, suppliers, regulatory bodies, allies, and competitors. This feature is called an open system which places an organization in a larger context of influence emanating from these relational activities. To guide the process of monitoring this influence, those at the leadership level create roles to assist and coordinate the ethical issues that emerge. The consistent manner in which ethical issues are routinely dealt with or unaddressed establishes an organization’s culture.

Generally speaking, organizational culture is defined by the guiding values, principles, attitudes, practices, patterns of thought, and communication style; it is further articulated in the organization’s mission and vision statements. Research has identified four definitive features that constitute the culture of an organization (Boyle et al. 2004):

  1. Power as expressed by centralization, individual power and decision-making, autocratic or patriarchal power, fear of punishment, implicit rules, and the alternating tension of “power over” versus “power with.” The values that emerge are control, stability, and loyalty.
  2. Bureaucracy as experienced by hierarchical structure, emphasis on formal procedures and rules, boundaries of authority and clearly defined role requirements, minimized risks, an impersonal and predictable work environment, and positions are more important than people leading to the awareness that employees are replaceable. The values that emerge are productivity, predictability, efficiency, and control.
  3. Achievement and innovation as demonstrated by emphasis on the notion of the team, a strong belief in the mission of an organization, worker autonomy and flexibility, decision-making encouraged at the lower levels, the promotion of cross-functional knowledge and skills. The values that emerge are creativity, adaptability, risk-taking, and teamwork.
  4. Support as evidenced by egalitarianism, nurturing personal growth and development, a safe environment, nonpolitical and typically a nonprofit organization. The values that emerge are commitment, consensus, and growth.

These four represent the traditional view of organizational cultures; contemporary market needs have necessitated updating the design of organizational culture to include risk-taking, creating change in a proactive way, strategic planning, responding to rapid change, and maintaining a high level of consistency. A healthy organizational culture recognizes the importance of shared social responsibility and maintaining fidelity to key values of justice and integrity.

The concept that organizational leadership and culture are two sides of the same coin used as currency in an organization’s ethos provides a window for understanding why some organizations have been successful both ethically and financially (Brown 2005). In distinguishing leadership from management or administration, one can argue that leadership creates and changes cultures, while management and administration act within a culture (Schein 2010). The effective delivery of an organization’s ethical goals is demonstrated through acts of fairness, compassion, integrity, honor, and responsibility. Some organizations broaden the list to include dignity and loyalty. Equally important in stature to management’s fiduciary responsibilities is the place given to individual autonomy of employees to act consistently in favor of the common good and maintain a commitment to the organization’s values and mission. In the United States during the last two decades of the twentieth century, this understanding ushered in a new era for organizational ethics in the realm of corporate ethics self-regulation (Roberts 2009). Ethical codes of conduct and comprehensive approaches to ethics management, compliance and/or integrity programs, became the mainstay for organizational culture to support the moral agency for leadership and employees.

Framework For Implementing Organizational Ethics

The assumption that professional codes of conduct and corporate codes of conduct promote ethical behavior and inhibit wrongdoing has been confirmed by research. Accumulated knowledge in the field of organizational ethics indicates that there are clear differences between firms with and without ethical codes on three dimensions: a focus on profitability, use of discretionary funds for charitable contributions, and the importance of behaving morally and ethically. A consistent theme concerns the characteristics of effective codes of ethics in terms of promoting ethical behavior in organizations (Somers 2001).

Currently, there are two models for managing the ethical framework of an organization and implementing codes of conduct: compliance and integrity. First, compliance-based ethics management became the primary and popular method of maintaining high ethical standards in governmental and nongovernmental organizations in several developing countries worldwide. There are several significant reasons why organizations have embraced compliance regulation as the key method of keeping public confidence in their integrity. Compliance-based management (1) provides organizations a certain level of immunity from illegal acts committed by their employees and officials and (2) significantly reduces pressures to implement integrity-based programs by lowering organizational ethical expectations. Compliance-based ethics seek to minimize liability. Designed by corporate counsel, the aim of these programs is to detect, prevent, and punish illegal activities. Nonetheless, the heavy reliance on compliance ethics has made it much more difficult for employees and officials to hold organizations accountable for actions that fall outside the scope of compliance-based ethics laws and regulations.

Second, integrity-based ethics management envisions the ethical terrain differently than compliance. Organizational ethics is viewed in the wider scope of encouraging exemplary behavior, not in limiting moral awareness to the punitive legal compliance stance. An integrity-based ethics management combines a concern for the law with a focus on managerial responsibility for ethical behavior. Although strategies may vary, the basic premise of an integrity-based ethics management is to articulate guiding values and delineate preferred patterns of language and behavior. When integrated into daily interactions of an organization, such strategies can aid in preventing harmful behavior while tapping into the human potential for moral imagination. In this context, the ethical framework becomes no longer the burdensome constraint in which the company operates but the governing ethos of the organization’s aspiration to infuse justice and to enable responsible conduct.

Both of these ethics management strategies can boast a significant measure of effectiveness. First, leadership now acknowledges that compliance based programs have the ability to significantly reduce potential organizational penalties for illegal actions by their employees. In contrast, integrity-based programs make it much more difficult for organizations to respond to criticism of their policies and actions since it is harder to distinguish between permissible and impermissible actions by employees. Moreover, organizations embrace compliance approaches because they reinforce the ethic of neutrality, whereas integrity initiative programs empower employees to challenge organizational policies and actions. There is consensus that compliance-based programs have succeeded in significantly reducing the level of low-road ethical violations in organizations. More importantly, compliance-based approaches provide organizations with a certain level of protection from low-road violations by their employees. If organizations design compliance programs and administer them in good faith, they are generally able to avoid severe sanctions and significantly escape the dilemma of ethical backsliding.

Nonetheless, the ability of compliance-based ethics programs to protect institutions from sanctions related to low-road ethics violations by employees does not fully explain their popularity. Organizations recognize that by embracing compliance programs they largely immunize themselves against criticism for high-road ethics failures. Thus, the success of compliance strategies reduces the incentive for organizations to encourage their employees to address high-road ethics issues. This issue would not be a sufficient reason for organizations to abandon compliance based programs. It is maintained, however, that organizations have an obligation to place equal emphasis on compliance and integrity-based approaches to achieve an integrative and comprehensive solution.

In the global context, some national governments have embraced compliance ethics as a means to ensure ethical behavior in organizations whereas other nations have adopted high-road ethics programs. During the last decade of the twentieth century, the Organization for Economic Cooperation and Development reported on a study of how nine member countries, Australia, Finland, Mexico, the Netherlands, New Zealand, Norway, Portugal, the UK, and the United States, regulated government ethics. The report stressed that “the management of ethics and conduct is not just about monitoring and policing behavior. It is about seeking some consensus on what is good behavior and giving public servants guidance as to how they should act, make decisions, and use discretion in their everyday work” (PUMA 1996, p. 11). The study noted that the UK, Finland, Norway, Australia, the Netherlands, and New

Zealand designed and relied primarily upon an “aspirational” or high-road approach to ethics management. The UK’s First Report of the Committee of Standards in Public Life, for instance, identified Seven Principles of Public Life exemplified by selflessness, integrity, objectivity, accountability, openness, honesty, and leadership. As these approaches and practices take root in individual countries worldwide, the shift from local to global thrusts future ethical debates into a broader context.

Ethical Management With Global Stakeholders

In the era of globalization, organizational ethics in the international setting of business transactions of multinational corporations faces new challenges and emerging trends. In the next several decades, despite resistance to globalization and international strife in parts of the world, research indicates that little will impede the trend toward a global capitalism. The data on the rapid growth of global business show that 47 of the 100 largest economies are nation states whereas 53 are multinational corporations. If one company alone (Exxon Mobil Corporation) has annual revenues that exceed the Gross Domestic Product of all but 20 of the world’s 220 nations (Melloan 2004), a legitimate concern to assess the effectiveness of business and organizational ethics shifts to a more complex array of issues. The potential for ethical lapses is a reality as global free trade and systems in less regulated jurisdictions intersect.

The contours of global ethics are now shaped by the fact that “we live in one world”; the community is the community of host nations in which an organization does business. More and more this scenario of doing business in others’ countries is becoming the norm. Now the scope of major stakeholders include consumers, employees, owners, the community, government, competitors, and the natural environment resulting in new ethical controversies: outsourcing jobs to less developed countries, the differences between home country and host country ethical standards in decision-making practices, protecting vulnerable stakeholders, and adherence to upholding fundamental human rights. The result for global organizational ethics is the reality that moral tensions will be an everyday part of doing business worldwide.

In global ethics decision-making, greater emphasis focuses on the extent to which leadership and management uses home country ethical standards versus host country ethical standards in shaping practices and implementing decisions. The simplistic model of “do in Rome as the Romans do” is untenable. The cultural beliefs and norms of particular countries require more careful vigilance of the need to precede judgment with understanding the local host country culture. In turn, this ethical equilibrium gives way to a broader and deeper sensitivity to the transcultural value implications of actions and practices.

A conceptual framework for ethical responsibilities to global stakeholders constitutes a best practice. The corporate social responsibility (CSR) movement that flourished in two decades prior to the third millennium possesses global applicability. The CSR model emerged in the 1990s from American society’s expectations that organizations should be good corporate citizens who are held accountable to ethical standards and is growing exponentially in Europe. The notion that an ethical framework can encompass the scope of norms, standards, and expectations reflecting a belief system that the global community regards as fair, just, and consistent with respect for and protection of human rights holds promise. The seven moral guidelines for organizations operating globally state the following conditions: (1) do no intentional direct harm; (2) produce more good than bad for the host country; (3) contribute to the host country’s development; (4) respect human rights; (5) pay their fair share of taxes; (6) respect the local culture; (7) cooperate with the host government in developing ethical institutions with health and safety standards (DeGeorge 1993). In fact, ethical standards acceptable by all cultures, a moral universalism, would have broad international support, such as the UN Global Compact or the Global Reporting Initiative. More research in this area is needed to reconcile home country and host country ethical standards which in turn will advance organizational ethics in new directions.


The field of organizational ethics is regarded as an evolution of bioethics and perhaps as a natural and urgent reply to diminish the number of scandals arising from individual or corporate wrongdoing in the public and private sectors. The values of fairness, compassion, integrity, honor, and responsibility are typically named as the hallmarks of ethical behavior. The first task of establishing ethical practice in organizational structure involved formalizing codes of conduct and implementing initiatives to manage ethical decision-making and day-to-day practice at both the leadership and employee levels. Common structural features of compliance-based and integrity-based systems focused on training in relevant areas of law, strategies for confidential reporting, mechanisms for investigating potential misconduct, and audits to insure that legal and organizational standards are sufficiently met. Compliance-based strategies limit the dimension of moral imagination: integrity-based strategies offer opportunities for enabling responsible conduct. Empirical research indicates that both have merit; the deciding factor in adopting either strategy or a blend of the two relies on the culture and ethical standards of an organization. The emerging growth of multinational corporations doing business in other countries now requires organizational ethics to be broader, deeper, and more demanding. Broader in the sense that it seeks to encourage an organization’s fiduciary responsibility to extend beyond profitability and instill a sense of corporate social responsibility. Deeper in that it cuts to the ethos and lays bare the guiding principles, patterns of thought, and action of both the organization and its members. More demanding as it faces the task of reconciling the global sphere of culturally diverse values with a universal concern for preserving fundamental human rights and restoring trust if possible. No field is more crucial than organizational ethics for the third millennium.

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