copyright © houghton mifflin company4-1 o.c. ferrell university of new mexico john fraedrich...

Copyright © Houghton Mifflin Company 4-1

O.C. FerrellUniversity of New Mexico

John FraedrichUniversity of Wyoming

Linda FerrellUniversity of New Mexico

Business EthicsEthical Decision Making

and Cases, Seventh Edition

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Pages from the print options, with three slides per page.


Chapter 4

The Institutionalization of Business Ethics


Institutionalization in Business Ethics

• Relates to established laws, customs, and expected organizational programs that are considered normative in establishing reputation

• Institutions provide the requirements and societal expectations to reward and sanction ethical decision making


Boundaries and Core Practices

• Boundaries– Voluntary– Mandated

• Core practices– Helps ensure compliance with

legal requirements and industry regulation


Laws and Regulatory Issues

• Established by the government to set minimum standards for acceptable behavior

• Laws are passed because society does not always trust business to act in its best interest


Types of Laws

• Civil• Criminal• The difference between the two is

enforcement.


Business Ethics Disputes

• Generally resolved through lawsuits• Most laws affecting business fall

into one of five categories:– Laws regulating competition– Laws protecting consumers– Laws promoting equity and safety– Laws protecting the environment– Laws that encourage ethical conduct


Laws Protecting Consumers

• Require business to provide accurate information about products and services and to follow safety standards

• FTC’s Bureau of Consumer Protection


Laws Promoting Equity and Safety

• Laws promoting equity in the workplace protect the rights of minorities, women, older persons, and persons with disabilities

• Affirmative action programs


Laws Protecting the Environment

• Environmental Protection Agency (EPA)

• Many environmental laws have resulted in the elimination or modification of goods and services


The Sarbanes-Oxley Act

• Establishes a system of federal oversight of corporate accounting practices

• Requires top managers to certify that their firms’ financial reports are complete and accurate, making CEOs and CFOs accountable

• Provides protection for “whistle-blowing” employees


Benefits of Sarbanes-Oxley

• Greater accountability of top managers• Renewed investor confidence• Greater protection of retirement plans• Greater penalties for senior managers


Cost of Compliance

• Estimated at $1 million per $1 billion in revenues

• Especially compliance with Section 404


Philanthropic Issues

• Involves business’s contribution to the local community and society

• Quality of life issues• Philanthropic issues• Strategic philanthropy

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