Chapter 4 Business ethics 8e

Ethical Decision Making for Business 8e Fraedrich/Ferrell/Ferrell CHAPTER 4 The Institutionalization of Business Ethics 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 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 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 ... Organizations Highly Appropriate Core Practices Institutionalization in Business Ethics • Three dimensions to effective business ethics compliance – Voluntary practices – Mandated boundaries – Core... Compliance • Laws and regulations established by governments • Laws regulating business passed because stakeholders believe business cannot be trusted to what is right Types of Laws • Civil law defines... 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