25 terms

Chapter 4: The Institutionalization of Business Ethics

3 Dimensions to effective Business Compliance
Voluntary practices
Core practices
Mandated Boundaries
Voluntary Practices
Beliefs, values, and voluntary contractual obligations of a business.
All business have some (Ie Philanthropy)
Core practices
Documented best practices, often encouraged by legal and regulatory forces and trade associations
Ie BBB can provide direction
Mandated Boundaries
Externally imposed boundaries of conduct
(Ie laws, rules, and regulations)
Legal compliance
Laws and regulations established by governments
Set minimum standards for responsible behavior
-Required because stakeholders do not trust business to do what is right (Ie Environmental protection, consumer safety)
Types of Laws
Civil Law
Criminal Law
Civil Law
Defines the rights and duties of individuals and organizations
-enforced by individuals in court
Criminal Law
Prohibits specific actions and imposes punishments for breaking the law
-enforced by state or nation
Five categories of Laws
Regulating competition
Protecting consumers
Protecting equity and safety
Protecting the environment
Incentives to encourage organizational compliance programs
Regulating competition
Pro-competitive legislation
encourage competition and prevent activities that restrain trade
Protecting consumers
Require businesses to provide accurate information about products and services and to follow safety standards (Ie FDA and FTC laws)
-Groups with specific vulnerabilities have higher levels of legal protection
Promoting Equity and Safety
Protect the rights of minorities, women, elderly, and disabled
-OSHA (health inspections)
-Title VII, EEOC, Affirmative Action, Equal Pay Act
Protecting the Environment
Created in response to stakeholder concerns about businesses' impact on environment
...Waste disposal is a serious problem for firms and individuals
The Green Consumer
Age groups under 30 are willing to pay more for "green" products
Overseers of business actions
-Accountants, regulators, lawyers, financial rating firms, auditors
Critical in providing accurate information to stakeholders
Measure and disclose financial information to the public
Issues:Conflicts of interest, excessive focus on growth and profits
Risk Assessors
Failed in its duties during the most recent recession
-Problems with risk models led to inaccurate ratings
-Misled investors and stakeholders
Sarbanes-Oxley Act (SOX)
Established a system of federal oversight of corporate accounting practices.
-Gave the PCAOB authority to monitor accounting firms
-Requires top managers to certify their firms' financial reports (more accountability for C-group)
-Some legal protection for whistleblowers
Loopholes existed, misconduct continued
Dodd-Frank Wall Street Reform and Consumer Protection Act
Most sweeping consumer protection legislation since the Great Depression
Seeks to improve financial regulation, increase oversight, and prevent excessive risk-taking and deceptive practices
New offices: CFPB (Consumer Financial Protection Bureau)
-Increased whistle-blower protections (bounty program)
Federal Sentencing Guidelines for Organizations
Passed as an incentive for organizations to develop and implement programs for ethical and legal compliance
-All felonies and class-A misdemeanors committed by employees
Passed 1991, amended 2004, 2008, 2010
Highly appropriate core practices
Focus on developing sound organizational practices and structural integrity for performance measures
-Most ethical issues are nonfinancial
Voluntary Responsibilities to Stakeholders
4 Major Benefits:
-Improves quality of life in communities
-Reduces government involvement
-Develops employee leadership skills
-Helps create an ethical culture
Cause-related marketing
Ties an organizations products to a social concern through a marketing program
Strategic philanthropy
The synergistic and mutually beneficial use of a company's core competencies and resources to deal with social issues
Why is Institutionalization of Business Ethics important?
Embedding values, norms, and artifacts in organizations, industries, and society
--The failure to understand highly appropriate core practices provides the opportunity for unethical conduct