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The Institutionalization of Business Ethics

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Ethical Decision Making for Business 8e Fraedrich/Ferrell/Ferrell CHAPTER 4 The Institutionalization of Business Ethics Chapter Objectives To distinguish between the ... – PowerPoint PPT presentation

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Title: The Institutionalization of Business Ethics


1
Ethical Decision Making for Business 8e
Fraedrich/Ferrell/Ferrell
CHAPTER 4
  • The Institutionalization of Business Ethics

2
Chapter Objectives
  • To distinguish between the voluntary and mandated
    boundaries of ethical conduct
  • To provide specific mandated requirements for
    legal compliance in specific subject matter areas
    related to competition, consumers, safety, and
    the environment
  • To specifically address the requirements of the
    SarbanesOxley legislation and implementation by
    the Securities and Exchange Commission

3
Chapter Objectives (cont.)
  • To provide an overview of regulatory efforts to
    provide incentives for ethical behavior
  • To provide an overview of the Federal Sentencing
    Guidelines for Organizations recommendations and
    incentives for developing an ethical corporate
    culture
  • To provide an overview of voluntary boundaries
    and the relationship to social responsibility

4
Chapter Outline
  • Managing Ethical Risk Through Mandated and
    Voluntary Programs
  • Mandated Requirements for Legal Compliance
  • Gatekeepers and Stakeholders
  • The SarbanesOxley Act
  • Laws That Encourage Ethical Conduct
  • Federal Sentencing Guidelines for Organizations
    Highly Appropriate Core Practices

5
Institutionalization in Business Ethics
  • Three dimensions to effective business ethics
    compliance
  • Voluntary practices
  • Mandated boundaries
  • Core practices

6
Legal Compliance
  • Laws and regulations established by governments
  • Laws regulating business passed because
    stakeholders believe business cannot be trusted
    to do what is right

7
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)

8
Most Laws Affecting Business Fall into 5
Categories
  • Regulating competition
  • Protecting consumers
  • Protecting equity and safety
  • Protecting the environment
  • Those that encourage ethical conduct

9
Gatekeepers and Stakeholders
  • Trust is the glue that holds businesses together
  • Gatekeepers are overseers of business actions
  • Accountants
  • Risk Assessment

10
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
  • Requires top managers to certify their firms
    financial reports
  • Some legal protection for whistle-blowers

11
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
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