ARC MGMT 374 Week 4 Presentation

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ARC MGMT 374 Week 4 Presentation

  1. 1. Chapter 4: The Institutionalization of Business Ethics Part Two: Ethical Issues and the Institutionalization of Business Ethics© 2013 Cengage Learning. All Rights Reserved. 1
  2. 2. Institutionalization in Business Ethics Three dimensions to effective business compliance  Voluntary practices: Include beliefs, values, and voluntary contractual obligations of a business  All businesses have some voluntary commitments  Philanthropy: Giving back to communities and causes  Core practices: Documented best practices, often encouraged by legal and regulatory forces and trade associations  The Better Business Bureau can provide direction  Mandated boundaries: Externally imposed boundaries of conduct (e.g. laws, rules, and regulations)© 2013 Cengage Learning. All Rights Reserved. 2
  3. 3. Legal Compliance Laws and regulations established by governments  Set minimum standards for responsible behavior  Laws regulating businesses are required because stakeholders believe businesses cannot be trusted to do what is right in some areas  Consumer safety  Environmental protection  Policy changes over time in response to business abuses and consumer demands for safety  Telling employees to obey the law is meaningless without training in legal risk areas© 2013 Cengage Learning. All Rights Reserved. 3
  4. 4. The Elements of an Ethical Culture© 2013 Cengage Learning. All Rights Reserved. 4
  5. 5. Types of Laws  Civil law defines the rights and duties of individuals and organizations  Individuals (in court) enforce civil laws  Criminal law prohibits specific actions and imposes punishments for breaking the law  State or nation enforces criminal laws© 2013 Cengage Learning. All Rights Reserved 5
  6. 6. Relationship Between Top Management Talking about Ethics and Employees NOT Observing Misconduct© 2013 Cengage Learning. All Rights Reserved. 6
  7. 7. Mandated Requirement for Legal Compliance  Laws establish the basic ground rules for responsible business activities  Five categories of laws 1. Regulating competition 2. Protecting consumers 3. Protecting equity and safety 4. Protecting the environment 5. Incentives to encourage organizational compliance programs© 2013 Cengage Learning. All Rights Reserved. 7
  8. 8. Laws Regulating Competition Laws passed to prevent the establishment of monopolies, inequitable pricing, and other practices that reduce or restrict competition among businesses  Sometimes called procompetitive legislation because they encourage competition and prevent activities that restrain trade© 2013 Cengage Learning. All Rights Reserved. 8
  9. 9. Laws Protecting Consumers  Laws protecting consumers require businesses to provide accurate information about products and services and to follow safety standards  The first consumer protection law was passed in 1906 in response to poor working conditions in factories  The FTC’s Bureau of Consumer Protection protects consumers against unfair, deceptive, or fraudulent practices  The FDA regulates food safety, human drugs, and tobacco, among other things Groups with specific vulnerabilities have higher levels of legal protection© 2013 Cengage Learning. All Rights Reserved. 9
  10. 10. Laws Promoting Equity and Safety Laws promoting equity in the workplace protect the rights of minorities, women, older persons, and disabled persons  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 inspections to ensure a safe working environment • Many people still work in unsafe environments • Companies may underreport accidents to avoid inspection and regulation© 2013 Cengage Learning. All Rights Reserved. 10
  11. 11. Laws Protecting the Environment Created in response to stakeholder concerns about businesses’ impact on environment  Sustainability  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) was created to coordinate environmental agencies Waste disposal is a serious problem for firms and individuals© 2013 Cengage Learning. All Rights Reserved. 11
  12. 12. The Green Consumer Which age groups are willing to pay significantly more for green products?© 2013 Cengage Learning. All Rights Reserved. 12
  13. 13. Gatekeepers and Stakeholders Trust is the glue that holds businesses together  Gatekeepers: Overseers of business actions  Accountants, regulators, lawyers, financial rating firms, auditors  Are critical in providing accurate information to stakeholders© 2013 Cengage Learning. All Rights Reserved. 13
  14. 14. Accountants Measure and disclose financial information to the public  Assure accuracy Some accountants have not adhered to their stakeholder responsibilities • Excessive focus on growth and profits • Conflicts of interest© 2013 Cengage Learning. All Rights Reserved. 14
  15. 15. Risk Assessors A group that failed in its duties to stakeholders during the most recent recession  Problems with risk models led to inaccurate ratings  Misled investors and stakeholders More oversight of credit rating firms in the future?© 2013 Cengage Learning. All Rights Reserved. 15
  16. 16. The Sarbanes-Oxley (SOX) Act Established a system of federal oversight of corporate accounting practices  Gives the Public Company Accounting Oversight Board (PCAOB) authority to monitor accounting firms  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 whistleblowers  Loopholes existed and misconduct continued© 2013 Cengage Learning. All Rights Reserved. 16
  17. 17. Dodd-Frank Wall Street Reform and Consumer Protection Act The most sweeping consumer protection legislation since the Great Depression  Seeks to improve financial regulation, increase oversight, and prevent excessive risk-taking and deceptive practices  Created new offices  The Office of Financial Research  The Financial Stability Oversight Council  The Consumer Financial Protection Bureau (CFPB)  Increased whistle-blower protections  Whistle-blower bounty program© 2013 Cengage Learning. All Rights Reserved. 17
  18. 18. Federal Sentencing Guidelines for Organizations Passed as an 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 commitment to ethical conduct  Passed in 1991; amendments in 2004, 2008, and 2010© 2013 Cengage Learning. All Rights Reserved. 18
  19. 19. Employees Who Feel Better Prepared are More Likely to Report© 2013 Cengage Learning. All Rights Reserved. 19
  20. 20. Highly Appropriate Core Practices Focus on developing sound organizational practices and structural integrity for performance measures  Not a focus on individual morals  Most ethical issues relate to nonfinancial issues  The Sarbanes-Oxley Act and Dodd-Frank Act provide standards for financial performance  The Integrity Institute developed a model that standardizes measures for nonfinancial performance© 2013 Cengage Learning. All Rights Reserved. 20
  21. 21. Voluntary Responsibilities Relate to business’ contributions to stakeholders  Four major benefits  Improves quality of life in communities  Reduces government involvement  Develops employee leadership skills  Helps create an ethical culture Cause-related marketing: Ties an organization’s product(s) to a social concern through a marketing program Strategic philanthropy: The synergistic and mutually beneficial use of a company’s core competencies and resources to deal with social issues© 2013 Cengage Learning. All Rights Reserved. 21
  22. 22. The Importance of Institutionalization in Business Ethics Involves embedding values, norms, and artifacts in organizations, industries, and society  The failure to understand highly appropriate core practices provides the opportunity for unethical conduct© 2013 Cengage Learning. All Rights Reserved. 22

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