1. The Institutionalization of Business Ethics
Ethical Decision Making for Business 8e Fraedrich/Ferrell/Ferrell
CHAPTER 4
The Institutionalization of Business Ethics

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