Chapter 4 Business ethics 8e

The Institutionalization of Business Ethics Ethical Decision Making for Business 8e Fraedrich/Ferrell/Ferrell CHAPTER 4... Chapter Objectives• To distinguish between the voluntary and ma

The Institutionalization of

Business Ethics

Ethical Decision Making for Business 8e Fraedrich/Ferrell/Ferrell

CHAPTER 4

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

Sarbanes–Oxley legislation and implementation by the Securities and Exchange Commission

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

Chapter Outline

• Managing Ethical Risk Through Mandated and

Voluntary Programs

• Mandated Requirements for Legal Compliance

• Gatekeepers and Stakeholders

• The Sarbanes–Oxley Act

• Laws That Encourage Ethical Conduct

• Federal Sentencing Guidelines for Organizations

Highly Appropriate Core Practices

Institutionalization in Business Ethics

• Three dimensions to effective business ethics

compliance

– Voluntary practices

– Mandated boundaries

– Core practices

Legal Compliance

• Laws and regulations established by governments

• Laws regulating business passed because

stakeholders believe business cannot be trusted to do what is right

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)

Most Laws Affecting Business Fall into

5 Categories

• Regulating competition

• Protecting consumers

• Protecting equity and safety

• Protecting the environment

• Those that encourage ethical conduct

Gatekeepers and Stakeholders

• Trust is the glue that holds businesses together

• Gatekeepers are overseers of business actions

– Accountants

– Risk Assessment

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

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