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Chapter-4-Department-Of-Business-And-Administration Slides

The document discusses the institutionalization of business ethics including voluntary practices, mandated boundaries like laws and regulations, and core practices. It covers different types of laws and how they regulate competition, protect consumers and the environment, and promote equity and safety. Gatekeepers and stakeholders are also discussed.

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Karam Alhaj
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Download as PDF, TXT or read online on Scribd
130 views

Chapter-4-Department-Of-Business-And-Administration Slides

The document discusses the institutionalization of business ethics including voluntary practices, mandated boundaries like laws and regulations, and core practices. It covers different types of laws and how they regulate competition, protect consumers and the environment, and promote equity and safety. Gatekeepers and stakeholders are also discussed.

Uploaded by

Karam Alhaj
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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C HAPTER 4

The Institutionalization of
Business Ethics
Institutionalization in Business Ethics
• Three dimensions to effective business ethics
compliance
– Voluntary practices: Include the beliefs, values,
and voluntary contractual obligations
• All businesses have some voluntary commitments
(e.g., philanthropy)
– Mandated boundaries: Externally imposed
boundaries of conduct (e.g., laws and regulations)
– Core practices: Documented best practices, often
encouraged by legal and regulatory forces
Legal Compliance
• Laws and regulations
established by governments
– Minimum standards for
responsible behavior
• Laws regulating business
passed because stakeholders
believe business cannot be
trusted to do what is right

Source: Hisham Ibrahim


Elements of an Ethical Culture
Types of Laws

• Civil law defines the rights and duties of individuals


and organizations
• Criminal law prohibits specific actions and imposes
punishment for breaking the law
• The difference is enforcement
– Criminal laws enforced by the state or nation
– Civil laws enforced by individuals
(generally in court)
Only 1 in 4 Companies Has a Well-
Implemented Ethics Program

Source: “2007 National Business Ethics Survey,” Ethics Resource Center, p. 20


Most Laws Affecting Business Fall into
5 Categories
• Regulating competition
• Protecting consumers
• Protecting equity and safety
• Protecting the environment
• Those that encourage ethical
conduct

Source: Ryan McVay


Laws Regulating Competition

• Laws passed to prevent the establishment of


monopolies, inequitable pricing practices, and other
practices that reduce or restrict competition among
businesses
– Sometimes called procompetitive legislation:
Enacted to encourage competition and prevent
activities that restrain trade
Laws Protecting Consumers

• Laws protecting consumers require businesses to


provide accurate information about products and
services and to follow safety standards
• Groups with specific vulnerabilities have higher levels
of legal protection
• The FTC’s Bureau of Consumer Protection protects
consumers against unfair, deceptive, or fraudulent
practices
Laws Promoting Equity and Safety
• Laws promoting equity in the workplace protect the
rights of minorities, women, older persons, and
persons with disabilities
– Title VII of the Civil Rights Act
– Equal Employment Opportunity Commission
(EEOC)
– Affirmative action programs
– The Equal Pay Act
• Occupational Safety and Health Administration
(OSHA) makes regular inspections to ensure that
employees have a safe working environment
– Many still work in unsafe environments
Laws Protecting the Environment
• Largely in response to stakeholder concerns about
businesses’ impact on environment
• Sustainability has become an important concept to
businesses lately.
– Means “meeting the present needs without
compromising future generations’ abilities to meet
their own needs”
– Being a green company can boost profits
• The Environmental Protection Agency (EPA)
created in 1970 to coordinate environmental
agencies
Shopping for Environmentally Friendly
Products in a Recession

Source: 2009 Cone Consumer Environmental Survey of 1,087 adults, January 29–30.
Gatekeepers and Stakeholders

• Trust is the glue that holds businesses together


• Gatekeepers are overseers of business actions
– Accountants, regulators, lawyers, financial rating
corporations, auditors
– Are critical in providing
accurate information
that allows stakeholders
to gauge the true health
of a corporation

Source: © image100/Corbis
Risk Assessment

• A group that failed in its


duties to stakeholders during
the most recent recession
were assessors of financial
products
– Misled investors and
stakeholders
– More oversight of credit
rating firms in the future?
Source: Stockbyte
The Sarbanes-Oxley Act
• Establishes a system of federal oversight of
corporate accounting practices
• Gives the Public Company Accounting Oversight
Board (PCAOB) authority to monitor accounting firms
that audit public corporations
– Standards and rules for auditors in accounting
firms
• Requires top managers to certify their firms’ financial
reports
– More accountability for CEOs and CFOs
• Some legal protection for whistle-blowers
Cost of Compliance
• Estimated at $1 million per $1 billion in revenues
• Compliance with Section 404 requires:
– That management create reliable internal financial
controls
– That management attest to the reliability and
accuracy of the financial statements
– An independent auditor must
attest to the statements

Source: C Squared Studios


Federal Sentencing Guidelines for
Organizations
• Incentive for organizations to develop and implement
programs for ethical and legal compliance
• Applies to all felonies and class A misdemeanors
committed by employees
• Philosophy that legal violations can be prevented
through organizational values and a commitment to
ethical conduct
Percentage of U.S. Workforce Who
Feel the Government is Currently
Providing too Little Oversight

Source: 2009 National Business Ethics Survey, Ethics Resource Center, p. 31


Highly Appropriate Core Practices

• Sarbanes-Oxley and FSGO seek to provide


incentives to develop appropriate core practices
– Focus on developing structurally sound
organization core practices and developing
structural integrity for financial performance and
non-financial performance
Employees’ Preparation to Respond to
Ethical Misconduct Risk

Source: National Business Ethics Survey, How Employees View Ethics in Their Organizations 1994-2205, (Washington D.C.: Ethics Resource Center, 2005): 39
Philanthropic Issues

• Involve business’s contribution to the local


community and society
• Quality of life issues
– Responsible production of goods and services
– Technology improvements…yet not damaging to
the environment or jeopardizing personal privacy
• Philanthropic issues
– Making the local community a better place to live
• Strategic philanthropy: Synergistic and mutually
beneficial use of a company’s core competencies and
resources to deal with social issues

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