Business Ethics Chapter 1 Study Guide

Morals

Refers to a person's personal philosophies about what is right or wrong. The important points that when one speaks of "_____", it is personal or singular. "______", your philosophies or sets of values of right and wrong, relate to you and you alone. You may use your personal "______" convictions in making ethical decision in any context.

Ethical Culture

acceptable behavior as defined by the company and industry. "________" is the component of corporate culture that captures the values and norms an organization defines and is compared to by its industry as appropriate conduct. The goal of an "________" is to minimize the need for enforced compliance of rules and maximize the use of principles that contribute to ethical reasoning in difficult or new situations.

Moral dillema

A situation where the person is faced with multiple choices, all of which are undesirable as defined by the person

Consumer Bill of Rights

In 1962, President John F Kennedy delivered a "Special Message on Protecting the Consumer Interest" that outlined four basic consumer rights: The right to safety, the right to be informed, the right to choose, and the right to be heard. These came to be known as the "_____________"

Values

"______" are enduring beliefs and ideals that are socially enforced. Several desirable or ethical "_____" for business today are teamwork, trust, and integrity. Such "_____" are often based on organizational or industry best practices

Principles

"______" are specific and pervasive boundaries for behavior that should not be violated. "_______" often become the basis for rules. Some examples of "______" could include human rights, freedom of speech, and the fundamentals of justice.

Federal Sentencing Guidelines for Organizations

"_______" approved by Congress in November 1991, set the tone for organizational ethical compliance programs in the 1990s. The guidelines, which were based on the six principles of DII, broke new ground by codifying into law incentives to reward organizations for taking action to prevent misconduct, such as developing effective internal legal and ethical compliance programs. Provisions in the guidelines mitigate penalties for business striving to root out misconduct and establish high ethical and legal standards. On the other hand, under (FSGO), if a company lacks an effective ethical compliance program and its employees violate the law, it can incur severe penalties. The guidelines focus on firms taking action to prevent and detect business misconduct in cooperation with government regulation.

Six Universal Values

Citizenship Caring Fairness Responsibility Respect Trustworthiness (Including, Honesty)

Business Ethics

Comprises organizational principles, values, and norms that may originate from individuals, organizational statements, or from the legal system that primarily guide individual and group behavior in business

Mid 1980's (Ethics in Business)

Defense industry initiative on business ethics and conduct (DII) was developed to guide corporate support for ethical conducts. (First attempt of an industry to regulate itself) Raegan-Bush Era Policy: Industry self-regulation rather than regulation by government was in the publics interest

!990's (Ethics in Business)

Institutionalization of Business Ethics President Bill Clinton: Continued to support self-regulation and free trade (Deregulated banking laws from the 1930's which led to the 2008 financial crisis) Government action with health-regulated social issues such as teenage smoking Federal Sentencing guidelines for organizations (FSGO): Set the tone for organizational ethical compliance program. (1991-first federal law focused on business ethics and publicly traded companies)

21st Century (Ethics in business)

Misconduct at Enron, WorldCom, Calibration caused the government and the public to look at things differently so in 2002 Congress passed the Sarbanes-Oxley Act: The most far reaching change in organizational control and accounting regulations since the securities and exchange act of 1934 during the "Great Depression"

Global Compact

United Nations launched what is called the "_________" The purpose of "_________" is to create openness and alignment among business, government, society, labor, and the United Nations. Companies that adopt this code agree to integrate the 10 principles into their business practices, publish their progress toward these objectives on an annual basis, and partner with others to advance broader objectives of the UN

Dodd-Frank Wall Street Reform and Consumer Protection Act

addressed some of the issues related to the financial crisis and recession. The Dodd-Frank Act was the most sweeping financial legislation since the Sarbanes-Oxley Act and possibly since laws put into effect during the Great Depression. It was designed to make the financial services industry more ethical and responsible. This complex law required regulators to create hundreds of rules to promote financial stability, improve accountability and transparency, and protect consumers from abusive financial practices.

Value Dillema

similar to moral dilemma but the individuals beliefs are grounded in societal norms

4 ways an organization's commitment to ethical practices benefits the organizations

1. Ethics Contributes to Employee Commitment (willingness to sacrifice for the organization, increases group creativity, and job satisfaction decreases turnover rate, less pressure to compromise ethical standards) 2. Ethics Contributes to investor loyalty (Negative publicity, lawsuits, and fines can lower stock prices, diminish customer loyalty, and threaten a company's long-term viability) 3. Ethics Contributes to customer satisfaction (High levels of perceived corporate misconduct decreases customer trust, Companies viewed as socially responsible increase customer trust and satisfaction) 4. Ethics Contributes to profits (Better business performance, Part of strategic planning toward obtaining the outcome of higher profitability)

Dodd Frank Act Various Objectives

Addressed some of the issues related to the financial crisis and recession. The Dodd-Frank Act was the most sweeping financial legislation since the Sarbanes-Oxley Act and possible since laws put into effect during the great depression. It was designed to make the financial service industry more ethical and responsible This complex law required regulators to create hundreds of rules to promote financial stability, improve accountability and transparency, and protect consumers from abusive financial practices

Corporate Social Responsibility (CSR)

An organization's obligation to maximize its positive impact on stakeholders and minimize its negative impact

Federal Sentencing Guidelines for Organizations various Objectives

Approved by Congress in November 1991, set the tone for organizational ethical compliance programs in the 1990's. The guidelines, which were based on the six principles of DII, broke new ground by codifying into law incentives to reward organizations for taking action to prevent misconduct, such as developing effective internal legal and ethical compliance programs. Provisions in the guidelines mitigate penalties for businesses striving to root out misconduct and establish high ethical and legal standards. On the other hand, under FSGO, if a company lacks an effective ethical compliance program and its employees violate the law, it can incur severe penalties. The guidelines focus on firms taking actions to prevent and detect business misconduct in cooperation with government regulation. At the heart of the FSGO is the carrot-and-stick approach-that is, by taking preventive actions against misconduct, a company may avoid onerous penalties should a violation occur. A mechanical approach using legalistic logic will not suffice to avert serious penalties. The company must develop corporate values, enforce its own code of ethics, and strive to prevent misconduct

1980's (Ethics in Business)

Business Ethics reaches maturity Centers for business ethics provide publications, courses, conferences, seminars Stakeholder theory developed

Defense Industry Initiative on Business Ethics and Conduct (DII)

In the 1980's, the "________" was developed to guide corporate support for ethical conduct. In 1986, 18 defense contractors drafted principles for guiding business ethics and conduct. The organization has since grown to nearly 50 members. This effort established a method for discussing best practices and working tactics to link organizational practices and policy to successful ethical compliance. The DII includes six principles.

Workplace Integrity

The Ethics Resource Center (ERS) conducts the Ethics and Compliance Initiative Global Business Ethics Survey (GBES) measures the risk and promotion of "_________". The (GBES) measures "__________" as the pressure to compromise organizational standards, observed misconduct, reporting of misconduct when observed, and retaliation against reports.

JFK "Consumer Bill of Rights" Four components:

The right to safety The right to be informed The right to choose The right to be heard

!960's (Ethics in Business)

The rise of social issues in business Development of anti-business trend Decay of inner cities President John F Kennedy introduced the consumer bill of rights (Not actual laws but concepts that led to future legislation)

Pre 1960's (Ethics in Business)

Theological discussion; Standards were set by the church

Sarbanes-Oxley Act

To address the loss of confidence in financial reporting and corporate ethics, in 2002 Congress passed the "_________", the most far-reaching change in organizational control and accounting regulations since the Securities and Exchange Act of 1934. The new law made securities fraud a criminal offense and stiffened penalties for corporate fraud. It also created an accounting oversight board that requires corporations to establish codes of ethics for financial reporting and to develop greater transparency in financial reports to investors and other interested parties. Additionally, the law requires top executives to sign off on their firms' financial reports and risk fines and long prison sentences if they misrepresent their companies' financial positions. The legislation further requires company executives to disclose stock sales immediately and prohibits companies from giving loans to top managers.

Sarbanes-Oxley Act Various Objectives

To address the loss of confidence in financial reporting and corporate ethics, in 2002 congress passed the Sarbanes-Oxley Act, The most far reaching change in organizational control and accounting regulations since the Securities and Exchange Act of 1934. The new law made securities fraud a criminal offense and stiffened penalties for corporate fraud. It also created an accounting oversight board that requires corporations to establish code of ethics for financial reporting and to develop greater transparency in financial reports to investors and other interested parties. Additionally, the law requires top executives to sign off on their firms financial reports and risk fines and long prison sentences if they misrepresent their companies financial positions. The legislation further requires company executives to disclose stock sales immediately and prohibit companies from giving loans to managers. Institutionalized the need to discover and address ethical and legal risk.