Business Ethics: Chapters 1&2

Dodd-Frank Wall Street Reform and Consumer Protection Act

Required regulators to create hundreds of rules to promote financial stability, improve accountability and transparency, and protect consumers from abusive financial practice.

Dodge v. Ford Motor Co.

Ruled that a business exists for the profit if stakeholders, and the board of directors should focus on the objective.

Social responsibility

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

Descriptive approach

Focuses on the actual behavior of the firm and usually addresses how decisions and strategies are made for stakeholder relationships.

Stakeholder model of corporate governance

Has a responsibility for economic success and viability to satisfy its stockholders.

Normative approach

Identifies ethical guidelines that dictate how firms should treat stakeholders.

Fifth Dll Principle

Insists member companies preserve the integrity of the defense industry.

Federal Sentencing Guidelines of Organizations (FSGO)

Made it almost mandatory for businesses to have an third training because if they didn't, they would be held accountable for their employees actions.

Sarbanes-Oxley Act

Made securities fraud a criminal offense and stiffened penalties for corporate fraud.

Duty of loyalty

Means all of their decisions should be in the best interests of the corporation and its stakeholders.

Second Dll Principle

Member companies are expected to provide ethics training for their employees as well as continuous support between training periods.

Sixth Dll Principle

Member companies must adopt a philosophy of public accountability.

Three approaches to stakeholder theory:

Normative, descriptive, and instrumental

Three types of activities that orientation encompasses

Organization, distribution, and responsiveness

Morals

Refer to a person's personal philosophies about what is right or wrong.

Major issues surrounding social responsibility

Social issues, consumer protection, sustainability, and corporate governance

Compensation

Something, typically money, awarded to someone as a recompense for loss, injury, or suffering.

Principles

Specific and pervasive boundaries for behavior that should not be violated.

First Dll Principle

Supports codes of conduct and their widespread distribution. Must be understandable and cover substantive areas in detail.

Reputation

The beliefs or opinions that are generally held about someone or something.

Ethical culture

The component of corporate culture that captures he values and norms an organization defines and is compared to by its industry as appropriate conduct.

Interlocking directorate

The concept of board members being linked to more than one company.

Stakeholder orientation

The degree to which a firm understands and addresses stakeholder demands.

Corporate governance

The development of formal systems of accountability, oversight, and control.

Duty of diligence

The duty to make informed and prudent decisions.

Federal Sentencing Guidelines for Organizations

The guidelines focus on firms taking action to prevent and detect business misconduct in cooperation with government regulation.

Stakeholder interaction model

The model that explains the reciprocal relationships between the firm and a host of stakeholders.

Four basic consumer rights

The right to safety, the right to be informed, the right to choose, and the right to be heard

Consumers'' Bill of Rights

The right to safety, the right to be informed, the right to choose, and the right to be heard.

Primary stakeholder

Those whose continued association is absolutely necessary for a firm's survival. Like employees, customers, and investors.

Fiduciaries

Trustees

Corporate citizenship

Used to express the extent to which businesses strategically meet the economic, legal, ethical, and philanthropic responsibilities placed on them by various stakeholders.

Stakeholder

Customers, investors, shareholders, and many others who have a "stake" or claim in some aspect of a company's products and outcomes.

Executive compensation

CEO compensation

Fourth Dll Principle

Companies need to perform extensive internal audits and develop effective internal reporting and voluntary disclosure plans.

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.

Third Dll Principle

Defense contractors must create an open atmosphere in which employees feel comfortable reporting violations without fear of retribution.

Instrumental approach

Describes what happens if firms behave in a particular way.

Defense Industry Initiative on Business Ethics and Conduct (Dll)

Developed to guide corporate support for ethical conduct.

Secondary stakeholder

Do not typically engage in transactions with a company and are therefore not essential to its survival.

Four levels of social responsibility

Economic, legal, ethical, and philanthropic

Values

Enduring beliefs and ideals that are socially enforced.

Shareholder model of corporate governance

Focuses on developing and improving the formal system for maintaining performance accountability between top management and the firms shareholders.