Week 4 Lecture Presentation


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  • It is clear from the Ethics Resource Center’s latest survey that there is a direct correlation between confidence in government oversight and the presence of a strong ethical business culture.
  • Week 4 Lecture Presentation

    1. 1. <ul><li>The Institutionalization of Business Ethics </li></ul>C H A P T E R 4
    2. 2. Institutionalization in Business Ethics <ul><li>Three dimensions to effective business ethics compliance </li></ul><ul><ul><li>Voluntary practices : Include the beliefs, values, and voluntary contractual obligations </li></ul></ul><ul><ul><ul><li>All businesses have some voluntary commitments (e.g., philanthropy) </li></ul></ul></ul><ul><ul><li>Mandated boundaries : Externally imposed boundaries of conduct (e.g., laws and regulations) </li></ul></ul><ul><ul><li>Core practices : Documented best practices, often encouraged by legal and regulatory forces </li></ul></ul>
    3. 3. Legal Compliance <ul><li>Laws and regulations established by governments </li></ul><ul><ul><li>Minimum standards for responsible behavior </li></ul></ul><ul><li>Laws regulating business passed because stakeholders believe business cannot be trusted to do what is right </li></ul>Source: Hisham Ibrahim
    4. 4. Elements of an Ethical Culture
    5. 5. Types of Laws <ul><li>Civil law defines the rights and duties of individuals and organizations </li></ul><ul><li>Criminal law prohibits specific actions and imposes punishment for breaking the law </li></ul><ul><li>The difference is enforcement </li></ul><ul><ul><li>Criminal laws enforced by the state or nation </li></ul></ul><ul><ul><li>Civil laws enforced by individuals </li></ul></ul><ul><ul><li>(generally in court) </li></ul></ul>
    6. 6. Only 1 in 4 Companies Has a Well-Implemented Ethics Program Source: “2007 National Business Ethics Survey,” Ethics Resource Center, p. 20
    7. 7. Most Laws Affecting Business Fall into 5 Categories <ul><li>Regulating competition </li></ul><ul><li>Protecting consumers </li></ul><ul><li>Protecting equity and safety </li></ul><ul><li>Protecting the environment </li></ul><ul><li>Those that encourage ethical conduct </li></ul>Source: Ryan McVay
    8. 8. Laws Regulating Competition <ul><li>Laws passed to prevent the establishment of monopolies, inequitable pricing practices, and other practices that reduce or restrict competition among businesses </li></ul><ul><ul><li>Sometimes called procompetitive legislation: Enacted to encourage competition and prevent activities that restrain trade </li></ul></ul>
    9. 9. Laws Protecting Consumers <ul><li>Laws protecting consumers require businesses to provide accurate information about products and services and to follow safety standards </li></ul><ul><li>Groups with specific vulnerabilities have higher levels of legal protection </li></ul><ul><li>The FTC’s Bureau of Consumer Protection protects consumers against unfair, deceptive, or fraudulent practices </li></ul>
    10. 10. Laws Promoting Equity and Safety <ul><li>Laws promoting equity in the workplace protect the rights of minorities, women, older persons, and persons with disabilities </li></ul><ul><ul><li>Title VII of the Civil Rights Act </li></ul></ul><ul><ul><li>Equal Employment Opportunity Commission (EEOC) </li></ul></ul><ul><ul><li>Affirmative action programs </li></ul></ul><ul><ul><li>The Equal Pay Act </li></ul></ul><ul><li>Occupational Safety and Health Administration (OSHA) makes regular inspections to ensure that employees have a safe working environment </li></ul><ul><ul><li>Many still work in unsafe environments </li></ul></ul>
    11. 11. Laws Protecting the Environment <ul><li>Largely in response to stakeholder concerns about businesses’ impact on environment </li></ul><ul><li>Sustainability has become an important concept to businesses lately. </li></ul><ul><ul><li>Means “meeting the present needs without compromising future generations’ abilities to meet their own needs” </li></ul></ul><ul><ul><li>Being a green company can boost profits </li></ul></ul><ul><li>The Environmental Protection Agency (EPA) created in 1970 to coordinate environmental agencies </li></ul>
    12. 12. Shopping for Environmentally Friendly Products in a Recession Source: 2009 Cone Consumer Environmental Survey of 1,087 adults, January 29–30.
    13. 13. Gatekeepers and Stakeholders <ul><li>Trust is the glue that holds businesses together </li></ul><ul><li>Gatekeepers are overseers of business actions </li></ul><ul><ul><li>Accountants, regulators, lawyers, financial rating corporations, auditors </li></ul></ul><ul><ul><li>Are critical in providing accurate information that allows stakeholders to gauge the true health of a corporation </li></ul></ul>Source: © image100/Corbis
    14. 14. Risk Assessment <ul><li>A group that failed in its duties to stakeholders during the most recent recession were assessors of financial products </li></ul><ul><ul><li>Misled investors and stakeholders </li></ul></ul><ul><ul><li>More oversight of credit rating firms in the future? </li></ul></ul>Source: Stockbyte
    15. 15. The Sarbanes-Oxley Act <ul><li>Establishes a system of federal oversight of corporate accounting practices </li></ul><ul><li>Gives the Public Company Accounting Oversight Board (PCAOB) authority to monitor accounting firms that audit public corporations </li></ul><ul><ul><li>Standards and rules for auditors in accounting firms </li></ul></ul><ul><li>Requires top managers to certify their firms’ financial reports </li></ul><ul><ul><li>More accountability for CEOs and CFOs </li></ul></ul><ul><li>Some legal protection for whistle-blowers </li></ul>
    16. 16. Cost of Compliance <ul><li>Estimated at $1 million per $1 billion in revenues </li></ul><ul><li>Compliance with Section 404 requires: </li></ul><ul><ul><li>That management create reliable internal financial controls </li></ul></ul><ul><ul><li>That management attest to the reliability and accuracy of the financial statements </li></ul></ul><ul><ul><li>An independent auditor must attest to the statements </li></ul></ul>Source: C Squared Studios
    17. 17. Federal Sentencing Guidelines for Organizations <ul><li>Incentive for organizations to develop and implement programs for ethical and legal compliance </li></ul><ul><li>Applies to all felonies and class A misdemeanors committed by employees </li></ul><ul><li>Philosophy that legal violations can be prevented through organizational values and a commitment to ethical conduct </li></ul>
    18. 18. Percentage of U.S. Workforce Who Feel the Government is Currently Providing too Little Oversight Source: 2009 National Business Ethics Survey, Ethics Resource Center, p. 31
    19. 19. Highly Appropriate Core Practices <ul><li>Sarbanes-Oxley and FSGO seek to provide incentives to develop appropriate core practices </li></ul><ul><ul><li>Focus on developing structurally sound organization core practices and developing structural integrity for financial performance and non-financial performance </li></ul></ul>
    20. 20. Employees’ Preparation to Respond to Ethical Misconduct Risk Source: National Business Ethics Survey, How Employees View Ethics in Their Organizations 1994-2205 , (Washington D.C.: Ethics Resource Center, 2005): 39
    21. 21. Philanthropic Issues <ul><li>Involve business’s contribution to the local community and society </li></ul><ul><li>Quality of life issues </li></ul><ul><ul><li>Responsible production of goods and services </li></ul></ul><ul><ul><li>Technology improvements…yet not damaging to the environment or jeopardizing personal privacy </li></ul></ul><ul><li>Philanthropic issues </li></ul><ul><ul><li>Making the local community a better place to live </li></ul></ul><ul><li>Strategic philanthropy: Synergistic and mutually beneficial use of a company’s core competencies and resources to deal with social issues </li></ul>