Business Ethics Final ND - Class 7-9

Examples of Formal Expressions of Organization's Culture

memos, written codes of conduct, handbooks, manuals, forms, and ceremonies

The more ____, the less trust employees feel toward the organization, and the greater the _____.

misconduct, turnover

Giving Voice to Values

they know what the right thing to do is, they just don't know quite how to go about doing it, or they lack the moral courage to do it

cause-related marketing

ties an organization's products directly to a social concern through a marketing program - affect buying patterns - short term

Dodd Frank: Consumer Financial Protection Bureau (CFPB)

"regulate(s) the offering and provision of consumer financial products or services under the Federal consumer financial laws

Whistleblower Protection

+ BOUNTY so monetary incentive from dodd frank

SOX 2002

- bc of acctg scandals, enron, arthur andersen, worl com -federal oversight of corporate accouting practices - requires corporations to establish codes of ethics for financial reporting - attempt to eliminate conflicts of interest --- accounting firms can NOT do both auditing and consulting services to the same client (section 201) - whistle blower protections --- BUT was STENGTHENED by dodd-frank act -- only public companies covered, report to department of labor, must have evident special damages, 180 days to do this, NO BOUNTY

internal reporting options

- boss/members of management - continue to report "up the line" - audit committee/board - ethics helpline/ethics office - human resources - legal

INTEGRATIVE: culture type

- combines high concern for people + performance - superior = recognize employees are more than interchangeable parts yes people, yep performance ex. Starbucks

values-based ethical cultures

- explicit mission statement - definition of core values - treatment of customers + employees - value statement per strategic business unit - explantation of why rules exist, what penalties are if violated, and how employees can help improve the ethics of company

CARING: culture type

- high concern for people, BUT minimal concern for performance ideas - really impossible for companies to due this yes people, no performance ex. Ben & Jerry's

EXACTING: culture type

- little concern for people, BUT high concern for performance no people, yes performance ex. United Parcel Systems

APATHETIC: culture type

- minimal concern for either performance or people - individual focus on their own self-interest no people, no performance ex. Countrywide Financial

"Drip, drip, drip"

- monthly newsletter - posters - branding

Reasons Codes Fail:

- not promoted --> nobody reads it - not easily accessible - written too legalistically - written vaguely, no accurate directions - top management NEVER refers to the code in body or spirit

Structure and content of communication and training varies widely across organizations. Variables include:

- size of org - industry - culture - geographic scope (centralized vs decentralized) - employee demographics - employee access to technology

Compliance Orientation

-Requires employees to commit to specific required conduct -Uses legal terms, statutes, and the like to teach employees the rules and penalties for noncompliance

civil law

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

compliance based = around risk management

= :)/ good in short-term --> ensure that compliance is fulfilled

Liebeck v. McDonald's Restaurants, P.T.S., Inc., No. D-202 CV-93-02419, 1995

Became a flashpoint in the debate in the U.S. over tort reform after a jury awarded $2.9 million to a woman who burned herself with hot coffee

"an organization ___ ____ guarantee an employee who reports potential wrongdoing: 1. absolute confidentiality 2. he or she will NOT be retaliated against

CAN NOT

Big Splash

Compliance & Ethics Month: launch values, code, ethics helpline - all employees town hall - road shows - company email and intranet - weekly messages from EXECs - training - all employees sign

According to the _______ to have an effective compliance and ethics program ... an organization shall: 1. exercise due diligence to PREVENT and DETECT criminal conduct 2. otherwise PROMOTE an organizational culture that ENCOURAGES ethical conduct and commitment to compliance with the law

Federal Sentencing Guidelines (1990s)

voluntary responsibilities

Improve quality of life and make communities the places where people want to do business, raise families, and enjoy life Pros: - easier to attract and retain employees and customers - < government involvement - employee leadership skills - > ethical culture

shrinkage

Loss of inventory that can be attributed to factors such as: "difference between the recorded inventory on a company's balance sheet and its actual inventory ..." - employee theft - shoplifting - administrative error - vendor fraud - damage - cashier error

Code of Ethics

Most comprehensive; consists of general statements, sometimes altruistic or inspirational, that serve as principles and as the basis for rule of conduct Generally specifies methods for reporting violations, disciplinary actions for violations, and a structure of due process

Criminal Law

Prohibits specific actions (fraud, theft, or securities trading violations) and imposes fines or imprisonment as punishment for breaking the law

Employee Diversity

Requires explicit communication and training (financial reporting, use of company resources, and intellectual property).

Dodd-Frank 2010

Seeks to: - improve financial regulation - increase oversight of the industry - prevent the types of risk-taking, deceptive practices, and lack of oversight that led to the 2008-2009 financial crisis

"_____ __ ___ ___" is often cited as determining factor in creating a high-integrity organization. (...) Followed up by action: " _____ ___ _____"

Tone at the Top, walking the talk

According to the Federal Sentencing Guidelines for Organizations, in order to have an effective compliance and ethics program an organization shall: (1) exercise due diligence to prevent and detect criminal conduct; and (2) otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law. True False

True

organizational probation

Use of on-site consultants to observe and monitor legal compliance efforts as well as to report the firm's progress toward avoiding misconduct to the U.S. Sentencing Commission.

social entrepreneurship

When an entrepreneur founds an organization with the purpose of creating social value Can be for-profit, nonprofit, government-based, or hybrids

Whistle-Blower Bounty Program

Whistle-blowers who report financial fraud to the Securities and Exchange Commission and Commodities Exchange Commission 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

McDonald's Shamrock Shakes, where proceeds from each shake sold go to fund Ronald McDonald House Charites, is best described as an example of . . . ? _____ a. Cause-related marketing _____ b. Strategic philanthropy _____ c. Social entrepreneurship _____ d. Voluntary responsibilities _____ e. Consumer protection

a

ethics audit

a systematic evaluation of an organization's ethics program and performance to determine effectiveness

Elements of Ethical Culture

all ad up to culture

4 culture types

apathetic, caring, exacting, integrative

cultural audit

assessment of an organization's values --> so ... --> success = stated values = INTEGRATED into an organization performed by outside consultants but also could be done internally

differential association

associating with others who are unethical, combined with the opportunity to act unethically, is a major influence on ethical decision-making

How was WorldCom's fraud discovered? a)It was reported to WorldCom's ethics helpline by an internal whistleblower who grew suspicious of certain accounting entries b)It was uncovered by WorldCom's Internal Audit Department c)It was uncovered by a crusading reporter for The Clarion-Ledger, a Jackson, Mississippi newspaper d)It was uncovered by the SEC, after complaints from WorldCom competitors and an examination of WorldCom's financial statements e)It was uncovered by WorldCom's external auditors, Arthur Andersen

b

Communication starts by "_____ _____", followed by " _____, _____, _____".

big splash; drip,drip, drip

Occupational Safety and Health Act of 1970

businesses maintain safe working environments

Although you are ultimately worried about the company's ability to comply with the complex maze of laws and regulations at the federal, state, and local levels across forty countries, which of the following should concern you the most: a. The company's ability to establish an anonymous, confidential, non-retaliatory reporting mechanism that can serve the needs of its employees around the clock. b. The company's ability to create and deliver ethics training that will resonate in the many languages and cultures in which the company does business. c. Senior management's commitment to the company's compliance and ethics program.

c

Which of the following includes a requirement that management assess the effectiveness of an organization's internal controls and commission audits of these controls by an external auditor in conjunction with the audit of its financial statements: a. an ethics audit b. Dodd-Frank Act c. Sarbanes-Oxley Section 404 d. Title VII of Civil Rights Act e. Whistle-blower Protection Act

c

Statement of Values

conceived by management, fully developed with INPUT from all stakeholders

2 basic dimensions in an organization's culture

concern for people and concern for performance

HALLMARKS of an effective corporate Ethics Help Line:

confidential, anonymous, non-retaliatory, independent, user-friendly

DII --> FSG --> SOX --> Dodd Frank -->

core practice core practice mandated boundary ...

cost of compliace

cost of compliance with SOX can be extensive and includes internal costs, external costs, and auditor fees all the expenses that a firm incurs to adhere to industry regulations

According to our authors, there are multiple dimensions of institutionalization of business ethics: _____ a. Voluntary practices that include the beliefs, values, and voluntary contractual obligations of a business _____ b. Core practices that are documented best practices, often encouraged by legal and regulatory forces as well as industry trade associations _____ c. Mandated boundaries that are externally imposed levels of appropriate conduct, such as laws, rules, and regulations _____ d. all of the above

d

According to our authors, which of the following is/are true with respect to centralized and decentralized organizational structures? a._____ In a centralized organization, decision-making authority is concentrated in the hands of top-level managers, and little authority is delegated to lower levels. b._____ In contrast, in a decentralized organization, decision-making authority is delegated as far down the chain of command as possible. c._____ Because of the strict formalization and implementation of ethics policies and procedures in centralized organizations, they tend to be more ethical in their practices than decentralized organizations, very generally speaking. d._____ all of the above. e._____ a and b only.

d

Because every organization has employees that will try to take advantage if there is an opportunity for misconduct, when developing a values-based ethical culture it must include a(n) ____ element. a. vision statement b. qui tam relator c. ethical d. compliance e. punitive

d

Several Legislative or regulatory regimes provide or call for mechanisms for employee to raise unethical conduct, including violations of law a. Federal Sentencing Guidelines for Organizations b. Sarbanes-Oxley c. Dodd-Frank d. all of the above e. a and b only

d

Which of the following statements about corporate culture is/are true? a. Corporate culture includes the behavioral patterns, concepts, values, ceremonies, and rituals that take place in an organization. b. The culture of an organization may be explicitly stated or unspoken. c. Failure to monitor or manage an organization's culture may foster unethical behavior. d. all of the above e. a and b only

d

centralized organization

decision-making authority is concentrated in the hands of top-level managers, and little authority is delegated to lower levels

Tone at the Top

define a company's management and board of director's leadership and their commitment to being honest and ethical

Americans with Disabilities Act of 1990 prohibits discrimination against people with _____.

disabilities

According to our authors, organizational cultures can be classified as: a. apathetic b. caring c. exacting d. integrative e. all of the above f. a,b, and c g. a and b only

e

According to our authors, the primary objective of U.S. antitrust laws is to _______. _____ a. protect consumers from high prices and foreign products. _____ b. protect domestic businesses. _____ c. protect employees. _____ d. promote strategies that enhance business welfare over consumer welfare. _____ e. distinguish competitive strategies that enhance consumer welfare from those that reduce it.

e

Approved by Congress in 1991, which of the following created incentives for organizations to develop and implement compliance & ethics programs, building on principles articulated by the Defense Industry Initiative on Business Ethics & Conduct? _____ a. Sarbanes-Oxley Act _____ b. U.S. Sentencing Commission's Guidelines for Ethical Compliance _____ c. Ethical Compliance Act _____ d. Dodd-Frank Act _____ e. Federal Sentencing Guidelines for Organizations (FSGO)

e

Associating with others who are unethical and who have the opportunity to act unethically can lead to a learning process known as: a. compliance b. misconduct c. opportunity d. differential equations e. differential association

e

The Dodd-Frank Wall Street Reform and Consumer Protection Act is a federal statute that _____ a. was signed into law by President Obama on July 21, 2010 in order to further regulate our financial system _____ b. among other things, was designed to increase accountability and transparency in the financial industry and protect consumers from deceptive financial practices _____ c. established the Consumer Financial Protection Bureau (CFPB) to protect consumers from unsafe financial products _____ d. gave federal regulators more power over large companies and financial institutions to prevent them from engaging in risky practices or becoming "too big to fail" _____ e. all of the above

e

The Sarbanes-Oxley Act is known for? _____ a. Lessening penalties for corporate fraud _____ b. Developing the Consumer Financial Protection Bureau _____ c. Recommending codes of ethics for financial reporting in corporations _____ d. Making fraudulent financial reporting a civil offense _____ e. Requiring greater transparency in financial reporting

e b. is the dodd frank c. requiresssss not recommends attempt to eleiminate conflicts of interest

When implementing training, it must be _____, and must _____ behavior.

effective, modify

qui tam relator

employee whistleblower latin for "he who sues in this matter for the king as well as for himself"

•Equal Pay Act of 1963 mandates that women and men who do equal work must receive _____ _____.

equal pay

mandated boundary

ex. antitrust and consumer protection laws --> result in civil and criminal penalties

______ statements of values, beliefs, and customs usually come from upper management.

explicit

According to our authors, most of the laws that govern business activities fall into 1 of 5 groups including: ____ a. Laws Regulating Competition ____ b. Laws Protecting Consumers ____ c. Laws Promoting Equity and Safety ____ d. Protection of the Natural Environment ____ e. Incentives to Encourage Compliance Programs ____ f. All of the above ____ g. a-d only

f

If the authors of our textbook were to answer Lucius Fox's question, they would suggest that as CEO of Wayne Enterprises he should want a corporate compliance and ethics program in order to, among other things: a.To sensitize employees to potential legal/ethical issues in work environments b.Increase employees' ethical awareness, participation in ethical decision making and ethical behavior c.Foster ethical decision making, which requires terminating unethical employees and improving the firm's ethical standards d.Eliminate 'Bad Apples' (employees) e.Prevent an entire organization from becoming a 'Bad Barrel' f.All of the above g.a, b and c only

f

You've just been named Chief Ethics & Compliance Officer of Wayne Enterprises. Your duties probably include working with others to: a.Assess needs/risks an organization-wide ethics program must address b.Develop/distribute the code of conduct c.Conduct training programs d.Establish/maintain an ethics helpline e.Investigate allegations of wrongdoing f.All of the above g.a and b only h.a, b and c only i.a, b, c and d only

f

Compliance

list of Don'ts - rules we should NOT break

According to our authors, laws that govern equity and safety in the workplace include: ____ a. Title VII of the Civil Rights Act of 1964 ____ b. Occupational Safety and Health Act ____ c. Pregnancy Discrimination Act ____ d. Americans with Disabilities Act ____ e. Sherman Antitrust Act ____ f. All of the above ____ g. a-d only

g

core practice

if ignored = consequences/lead to misconduct

•first consumer protection law was passed in 1906, Pure Food and Drug Act

in response to The Jungle, a novel by Upton Sinclair, which depicted, among other things, the atrocities and unsanitary conditions of the meatpacking industry in turn-of-the-century Chicago

Corporate culture is often expressed _____. For example: informal comments

informally;

Research: both approaches can _____ or work toward the same end

interact

Informal Ethics Audit

interview of employees and management ex. surveys, focus groups, etc.

" compliance-based cultures use a _____ _____ to ethics"

legalistic approach

Ethics

list of Do's - behaviors we aspire

Code of Conduct

more like a regulatory set of rules

Research: when personal and organizational values are compatible with one another, it tends to _____ influence workplace ethics

positively

Title VII of the Civil Rights Act of 1964 Equal Employment Opportunity Commission (EEOC) enforces Title VII of the Civil Rights Act of 1964

prohibits discrimination in employment on the basis of race, sex, religion, color, or national origin

Walk the Talk

putting your words into action—showing that you mean what you say by actively doing it yourself

Updated Foreign Corrupt Practices Act

recommend incorporating incentives into the firm's corporate culture to encourage ethical behavior

" _____ create a compliance culture organized around risk"

rules

corporate culture

shared values, norms, and artifacts that influence employees and determines behavior, including ways of solving problems that members (employees) of an organization share

"______ in particular have a strong influence on the ethics of their subordinates"

superiors

Values Orientation

the foundation of an organizational ethical culture --> strive to develop shared values

ethical leadership should start with the tone at the top --> followed by "_____")

walking the talk

external reporting options

whistleblowing - regulator - media

" ____ employees, tend to go along with their superiors' moral judgements to demonstrate loyalty"

young

Laws protecting consumers

•Federal Trade Commission's (FTC) Bureau of Consumer Protection - protects consumers against unfair, deceptive, or fraudulent practices •Food & Drug Administration (FDA) - regulates food safety, human drugs, tobacco, dietary supplements, vaccines, veterinary drugs, medical devices, cosmetics, products that give off radiation, and bio-logical products

Dodd Frank: Financial Stability Oversight Council (FSOC)

•Limit or closely supervise financial risks

Laws that protect consumers require businesses to:

•Provide accurate information about their goods and services and •Follow safety standards

strategic philanthropy

•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