Transcript The Institutionalization of Business Ethics CHAPTER 4 Ethical Decision

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 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
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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