To understand the institutionalization of business ethics, the differences between voluntary and legally mandated organizational practices. Mandated, Core, and Voluntary Practices of Ethical Decisions. Whistle-Blower Protection

1. THE INSTITUTIONALIZATION
OF BUSINESS ETHICS
Shahla Gahramanova
UNEC Business School

2. Dimensions of Institutionalization
Core practices
Documented best practices (often
encouraged by legal and regulatory
forces and trade associations
• The Better Business Bureau can
provide direction (analogue in
Azerbaijan)
Voluntary practices: Beliefs, values, and
voluntary contractual obligations of a business
Philanthropy: Giving back to communities and causes
Mandated boundaries
Externally imposed boundaries of
conduct: laws, rules, regulations
and other requirements)

3. Dimensions of Institutionalization

4. MANDATED REQUIREMENTS FOR
LEGAL COMPLIANCE
 Laws Regulating Competition
 Laws Protecting Consumers
 Laws Promoting Equity and Safety
 Laws on Protection of the Natural Environment
 Incentives to Encourage Org-l Compliance Programs
 Whistle-Blower Protection
 Whistle-Blower Bounty Program
 Cost of Compliance

5. Laws Regulating Competition
The issues surrounding the impact of competition on businesses’ social responsibility arise from the
rivalry among businesses for customers and profits. When businesses compete unfairly, legal and
social responsibility issues can result. Intense competition also leads companies to resort to
corporate espionage.
Both Intel and Microsoft have been hit with fines amounting to
billions of dollars for alleged antitrust activity in Europe.
Large firms can often generate economies of scale (for example,
by forcing their suppliers to lower their prices).
Google has been forced to change its practices in Europe
because of claims that it is unfairly dominating the search
engine market.
Small companies and even whole communities may resist the
efforts of large firms (like Bravo, Bazar store) to open stores in
their vicinity
Some companies’ competitive strategies may focus on
weakening or destroying a competitor that harms competition
and ultimately reduces consumer choice.

6. Haqsız rəqabət haqqında Azərbaycan Respublikasının
Qanunu (Bakı şəhəri, 2 iyun 1995-ci il № 1049) + əlavə
və dəyişikliklər
Law of the Republic of Azerbaijan on unfair competition
(Baku city, June 2, 1995 No. 1049) + amendments and
modifications

7. Laws Protecting Consumers
Is there any in Azerb? (Azad istehlakçılar birliyi)
Groups with specific vulnerabilities have higher levels of legal
protection
The Jungle describes, among
other things, the atrocities and
unsanitary conditions of the
meatpacking industry in turn-
of-the-century Chicago
TABLE 4–3 Laws
Protecting Consumers
Unsafe at Any Speed
Ralf Nader
LAW OF THE REPUBLIC OF AZERBAIJAN on consumer rights protection
İstehlakçıların hüquqlarının müdafiəsi haqqında AZƏRBAYCAN
RESPUBLİKASININ QANUNU

8. Laws Promoting Equity and Safety
 Title VII of the Civil Rights Act
 Equal Employment Opportunity Commission (EEOC)
 Affirmative action programs
 The Equal Pay Act
 Americans with Disabilities Act
 Occupational Safety and Health Administration (OSHA) makes inspections to
ensure a safe working environment
 Laws on Protection of the Natural Environment

10. The Sarbanes–Oxley Act
(2002)
The Sarbanes–Oxley Act was enacted to restore stakeholder confidence after
accounting fraud at Enron, WorldCom, and hundreds of other companies
resulted in investors and employees losing much of their savings. During the
resulting investigations, the public learned hundreds of corporations failed to
report their financial results accurately. Many stakeholders believed accounting
firms, lawyers, top executives, and boards of directors developed a culture of
deception to ensure investor approval and gain a competitive advantage.
Public Company Accounting Oversight Board
Auditor and Analyst Independence
Whistle-Blower Protection
Cost of Compliance

11. Voluntary Responsibilities
Cause-Related Marketing
Strategic Philanthropy
Strategic philanthropy: The synergistic and mutually beneficial use of core
competencies and resources to deal with stakeholders, benefit the company
and society
Social Entrepreneurship

12. Growth in ethics programs over time

13. Gatekeepers and Stakeholders
Trust is the glue that holds businesses and
their stakeholders together
 Gatekeepers: Overseers of business
actions
 Accountants, regulators, lawyers, financial rating
firms, auditors
 Critical in providing accurate information to
stakeholders

14. Federal Sentencing Guidelines for
Organizations
 FSGO urges organizations to develop and implement
compliance programs
 Guidelines apply 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
 2012 proposed amendments call for increased penalties for
certain types of security fraud

15. Developing an Effective Ethics
Program
 To understand the responsibility of the corporation to be a moral agent
 To understand why businesses need to develop ethics programs
 To list the minimum requirements for an ethics program
 To describe the role of codes of ethics in identifying key risk areas for the
organization
 To identify the keys to successful ethics training, including program types
and goals
 To examine the ways that ethical standards are monitored, audited, and
enforced and to understand the need for continuous improvement

16. Minimum Requirements for Ethics
and Compliance Programs (TABLE 8-1 )
Standards and procedures, such as codes of ethics, that are reasonably capable of detecting and
preventing misconduct
High-level personnel who are responsible for an ethics and compliance program
No substantial discretionary authority given to individuals with a propensity for misconduct
Standards and procedures communicated effectively via ethics-training programs.
Establishment of systems to monitor, audit, and report misconduct.
Consistent enforcement of standards, codes, and punishment
Continuous improvement of the ethics and compliance program

18. Values versus Compliance
Programs
What is the main aim of ethics programs?
- To create predictability in employee behavior.
Two types of control systems:
 Compliance orientation: identify and commit to specific
required conduct
 Values orientation: perception, commitment, ethical
reasoning

19. CODES OF CONDUCT
Codes of conduct is formal statements that describe what an
organization expects of its employees.
 code of ethics: specifies methods for reporting violations,
disciplinary action for violations, and a structure of due
process
 code of conduct is a written document that may contain some
inspirational statements but usually specifies acceptable or
unacceptable types of behavior
 statement of values serves the general public and also
addresses distinct groups such as stakeholders

20. Benefits of Having an Ethics Code

21. ETHICS OFFICERS
Responsiblities
 assessing the needs and risks that an organization- wide ethics
program must address
 developing and distributing a code of conduct or ethics
 conducting training programs for employees
 establishing and maintaining a confidential service to answer
employees’ questions about ethical issues
 making sure that the company is in compliance with government
regulation
 monitoring and auditing ethical conduct
 taking action on possible violations of the company’s code
 reviewing and updating the code

22. ETHICS TRAINING AND
COMMUNICATION
TABLE 8–5 Key Goals of Successful Ethics Training Programs
1. Identify key risk areas employees will face.
2. Provide experience in dealing with hypothetical or disguised ethical issues within
the industry through mini-cases, online challenges, DVDs, or other experiential
learning opportunities.
3. Let employees know wrongdoing will never be supported in the organization and
employee evaluations will take their conduct in this area into consideration.
4. Let employees know they are individually accountable for their behavior.
5. Align employee conduct with organizational reputation and branding.
6. Provide ongoing feedback to employees about how they are handling ethical
issues.
7. Allow a mechanism for employees to voice their concern that is anonymous, but
provide answers to key questions (24-hour hotlines).
8. Provide a hierarchy of leadership for employees to contact when they are faced
with an ethical dilemma they do not know how to resolve.

23. SYSTEMS TO MONITOR AND
ENFORCE ETHICAL STANDARDS
 Establish: written code of conduct
 Communicate: formal ethics training
 Monitor: rigorous auditing (Ethics officer to oversee the program)
 Revision of ethics program

24. Some of the key reasons that codes of
ethics fail
 code is not promoted and employees do not read;
 the code is not easily accessible;
 the code is written too legalistically and therefore is not
understandable by average employees;
 the code is written too vaguely, providing no accurate
direction;
 top management never refers to the code in body or spirit

26. AN EFFECTIVE ETHICS PROGRAM
According to a study by the Open Compliance Ethics
Group (OCEG), among companies with an ethics program
in place for 10 years or more, none have experienced
“reputation damage” in the last 5 years—“a testament to
the important impact these programs can have over
time.”
A program developed in the absence of misconduct will be much
more effective than one imposed as a reaction to scandal or
prosecution.

27. References
 Business Ethics: Ethical Decision Making and Cases, (2015) by O.C.
Ferrell, J. Fraedrick & L. Ferrell
 Business Ethics: A Textbook with Cases (2016) by William H. Shaw
 Corporate Governance (2013) by Christine A. Mallin
 Corporate Governance, Ethics and CSR (2013) by John Taylor, Justine
Simpson
 Corporate Governance and Business Ethics (2011) by Alexander Brink