Business Ethics

1. 4-1
Chapter 4
The Institutionalization
of Business Ethics

2. 4-2
Institutionalization in
Business Ethics
• Relates to established laws, customs, and
expected organizational programs that are
considered normative in establishing
reputation
• Institutions provide the requirements and
societal expectations to reward and sanction
ethical decision making

3. 4-3
Boundaries and Core
Practices
• Boundaries
– Voluntary
– Mandated
• Core practices
– Helps ensure compliance with legal
requirements and industry regulation

4. 4-4
Laws and Regulatory Issues
• Established by the government to set
minimum standards for acceptable
behavior
• Laws are passed because society does
not always trust business to act in its
best interest

5. 4-5
Types of Laws
• Civil
• Criminal
• The difference between the two is
enforcement.

6. Copyright © Houghton Mifflin Company 4-6
Business Ethics Disputes
• Generally resolved through lawsuits
• Most laws affecting business fall into
one of five categories:
– Laws regulating competition
– Laws protecting consumers
– Laws promoting equity and safety
– Laws protecting the environment
– Laws that encourage ethical conduct

7. 4-7
Laws Protecting Consumers
• Require business to provide accurate
information about products and
services and to follow safety standards
• FTC’s Bureau of Consumer Protection

8. 4-8
Laws Promoting Equity and
Safety
• Laws promoting equity in the workplace
protect the rights of minorities, women,
older persons, and persons with
disabilities
• Affirmative action programs

9. 4-9
Laws Protecting the
Environment
• Environmental Protection Agency (EPA)
• Many environmental laws have
resulted in the elimination or
modification of goods and services

10. 4-10
The Sarbanes-Oxley Act
• Establishes a system of federal
oversight of corporate accounting
practices
• Requires top managers to certify that
their firms’ financial reports are
complete and accurate, making CEOs
and CFOs accountable
• Provides protection for “whistle-
blowing” employees

11. 4-11
Benefits of Sarbanes-Oxley
• Greater accountability of top managers
• Renewed investor confidence
• Greater protection of retirement plans
• Greater penalties for senior managers

12. 4-12
Cost of Compliance
• Estimated at $1 million per $1 billion in
revenues
• Especially compliance with Section 404

13. 4-13
Philanthropic Issues
• Involves business’s contribution to
the local community and society
• Quality of life issues
• Philanthropic issues
• Strategic philanthropy