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The Institutionalization of Business Ethics

The Institutionalization of Business Ethics. C H A P T E R 4. Chapter Objectives. To distinguish between the voluntary and mandated boundaries of ethical conduct

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The Institutionalization of Business Ethics

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  1. The Institutionalization of Business Ethics C H A P T E R 4

  2. 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

  3. 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

  4. 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

  5. Institutionalization in Business Ethics Three dimensions to effective business ethics compliance Voluntary practices Mandated boundaries Core practices

  6. Legal Compliance Laws and regulations established by governments Laws regulating business passed because stakeholders believe business cannot be trusted to do what is right

  7. 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)

  8. Most Laws Affecting Business Fall into 5 Categories Regulating competition Protecting consumers Protecting equity and safety Protecting the environment Those that encourage ethical conduct

  9. Gatekeepers and Stakeholders Trust is the glue that holds businesses together Gatekeepers are overseers of business actions Accountants Risk Assessment

  10. 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

  11. 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

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