Business Ethics Ch.4 The Institutionalization of Business Ethics

What are the seven steps that the U.S. Sentencing Commission requires for an effective compliance program?

1. A firm must develop and disseminate a code of conduct that communicates required standards and identifies key risk areas for the organization. 2.High-ranking personnel in the organization who are known to abide by the legal and ethical standards of the industry (such as an ethics officer, vice president of human resources, general counsel, and so forth) must have oversight over the program. 3.No one with a known propensity to engage in misconduct should be put in a position of authority. 4.A communications system for disseminating standards and procedures (ethics training) must also be put into place. 5.Organizational communications should include a way for employees to report misconduct without fearing retaliation, such as an anonymous toll-free hotline or an ombudsman. Monitoring and auditing systems designed to detect misconduct are also required. 6.If misconduct is detected, the firm must take appropriate and fair disciplinary action. Individuals both directly and indirectly responsible for the offense should be disciplined. In addition, the sanctions should be appropriate for the offense. 7After misconduct has been discovered, the organization must take steps to prevent similar offenses in the future. This usually involves making modifications to the ethical compliance program, conducting additional employee training, and issuing communications about specific types of conduct.

What are the four sources of criminal and civil laws?

1. Constitutional Law 2. Common Law 3. Statutory Law 4. Administrative Law

What is the Better Business Bureau?

A leading self-regulatory body that provides directions for managing customer disputes and reviews advertising cases.

What is a conflict of interest? How does it relate to the SOA?

A situation in which a person is in a position to derive personal benefit from actions or decisions made in their official capacity. Law attempts to eliminate conflicts of interest by prohibiting accounting firms from providing both auditing and consulting services to the same client companies without special permission from the client firm's audit committee.

What is the Consumer Financial Protection Bureau?

An independent agency within the Federal Reserve System that "regulates the offering and provision of consumer financial products or services under the federal consumer financial laws."

What does the Food & Drug Administration regulate?

Approval of drugs.

What are core practices?

Are documented best practices, often encouraged by legal and regulatory forces as well as industry trade associations.

What is a primary reason why some small businesses resist the opening of large chain retailers like Walmart or Home Depot?

Because the large size creates economies of scale and they can charge lower prices

Which agency was established after the latest financial crisis, in response to a situation that caused many consumers to lose their homes?

Consumer Financial Protection Bureau

What is Civil Law?

Defines the rights and duties of individuals and organizations (including businesses).

What is the primary objective of U.S. antitrust laws?

Distinguish competitive strategies that enhance consumer welfare from those that reduce it.

What does the institutionalization of ethics involve?

Embedding values, norms, and artifacts in organizations, industries, and society.

What is the whistleblower bounty program of the Dodd-Frank Act?

Encourages more employees to come forward when they witness misconduct-are eligible to receive 10 to 30 percent of fines and settlements if their reports result in convictions of more than $1 million in penalties.

What are gatekeepers? What profession could be considered as gatekeepers?

Ethics creates the foundational trust between two parties in a transaction. Many people must trust and be trusted to make business work properly. Accountants & lawyers.

What are mandated boundaries?

Externally imposed boundaries of conduct, such as laws, rules, regulations, and other requirements.

What is the Sherman Antitrust Act of 1890?

First national legislation in the world against monopoly; prohibited trusts, restraints of trade, and monopolization, but the law was vague and ineffective; tycoons found a way to get out.

What are the provisions of the Sarbanes-Oxley Act? What board did the SOA create?

In addition to making fraudulent financial reporting a criminal offense and strengthening penalties for corporate fraud, the law requires corporations to establish codes of ethics for financial reporting and develop greater transparency in financial reporting to their investors and other stakeholders. Created the Public Company Accounting Oversight Board

What are the aspects of the institutionalization of social responsibility?

Legal, voluntary, and core practices.

Which major legislative act exempted the insurance industry from antitrust legislation?

McCarran-Ferguson Act of 1944

Companies found in violation of pro competitive legislation most likely established what?

Monopolies

What is Criminal Law?

Not only prohibits specific actions--such as fraud, theft, or securities trading violations-- but also imposes fines or imprisonment as punishment for breaking the law.

What is prohibited by Title VII of the Civil Rights Act of 1964?

Prohibits employers from discriminating against employees on the basis of sex, race, color, national origin, and religion.

Which major legislative act passed in response to public outrage over conditions described in Upton Sinclair's The Jungle, was the first consumer protection legislation?

Pure Food and Drug Act of 1906

What is the Dodd-Frank Wall Street reform and Consumer Protection Act? What are the provisions of the Act?

Seeks to improve financial regulation, increase oversight of the industry, and prevent the types of risk-taking, deceptive practices, and lack of oversight that led to the 2008-2009 financial crisis. Contains 16 provisions that include increasing the accountability and transparency of financial institutions, creating a bureau to educate consumers in financial literacy and protect the from deceptive financial practices, implementing additional incentives for whistle-blowers, increasing oversight of the financial industry, and regulating the use of complex derivatives.

What are the reasons why the institutionalization of business ethics has progressed in recent decades?

Stakeholders recognized the need to improve business ethics.

What anticompetitive strategies that focus on weakening or destroying a competitor have spurred antitrust legislation?

Sustained price cuts, discriminatory pricing, price collusion, and corporate espionage.

Which groups receive special legal protections?

The elderly, children, senior citizens, and young consumers.

Why have some criticized the Sarbanes-Oxley and similar legislation?

The national cost of compliance of the Sarbanes-Oxley Act can be extensive and includes internal costs, external costs, and auditor fees.

What is strategic philanthropy?

The synergistic and mutually beneficial use of an organization's core competencies and resources to deal with key stakeholders so as to bring about organizational and societal benefits

What is cause-related marketing?

Ties an organization's product(s) directly to a social concern through a marketing program.

What is the Federal Sentencing Guidelines for Organizations?

U.S. Sentencing Guidelines for Organizations created for federal prosecutions of organizations. These guidelines provide for just punishment, adequate deterrence, and incentives for organizations to prevent, detect, and report misconduct. Organizations need to have an effective ethics and compliance program to receive incentives in the case of misconduct. Created as an incentive for organizations to develop and implement programs designed to foster ethical and legal compliance.

What are the key elements of an organizational culture?

Values, norms, artifacts, and legal compliance.

What are voluntary responsibilities as they relate to a business's contributions to stakeholders? What is an example of a voluntary responsibility?

Voluntary responsibilities fall into the category of a business's contributions to its stakeholders. Ex: Donations to local and national charitable organizations.

What is a social entrepreneur?

When an entrepreneur founds an organization with the purpose of creating social value.

How do violations of the law usually start?

When businesspeople stretch the limits of ethical standards.