1. Chapter 4 The Institutionalization of Business Ethics

2. Learning Objectives
Distinguish between the voluntary and mandated boundaries of ethical conduct
Provide specific mandated requirements for legal compliance in specific subject matter areas related to competition, consumers, and safety
Specifically address the requirements of the Sarbanes–Oxley legislation and implementation by the Securities and Exchange Commission (SEC)

3. Learning Objectives (continued 1)
Describe the passage of the Dodd–Frank Wall Street Reform and Consumer Protection Act along with some of its major provisions
Provide an overview of regulatory efforts that provide incentives for ethical behavior

4. Learning Objectives (continued 2)
Provide an overview of the recommendations and incentives for developing an ethical corporate culture contained in the Federal Sentencing Guidelines for Organizations (FSGO)
Provide an overview of highly appropriate core practices and their relationship to social responsibility

5. Table 4.1 - Voluntary Boundary, Core Practices, and Mandated Boundaries of Ethical Decisions

6. Figure 4.1 - Elements of an Ethical Culture

7. Mandated Requirements for Legal Compliance
Any practice that does not reduce competition or harm consumers or society is permitted
Categories of law
Civil law: Defines the rights and duties of individuals and organizations
Criminal law: Prohibits specific actions and imposes fines or imprisonment as punishment for breaking the law

8. Mandated Requirements for Legal Compliance (continued)
Regulation of competition
Protection of consumers
Promotion of equity and safety
Protection of the natural environment
Incentives to encourage organizational compliance programs to deter misconduct

9. Laws Regulating Competition
Sherman Antitrust Act, 1890
Clayton Act, 1914
Federal Trade Commission Act,
Robinson–Patman Act, 1936
Wheeler–Lea Act, 1938
Lanham Act, 1946
Celler–Kefauver Act, 1950
Consumer Goods Pricing Act,
FTC Improvement Act, 1975
Antitrust Improvements Act, 1976
Foreign Corrupt Practices Act, 1977
Trademark Counterfeiting Act, 1980
Trademark Law Revision Act, 1988
Federal Trademark Dilution Act,
Digital Millennium Copyright Act,
Controlling the Assault of Non- Solicited Pornography and Marketing Act (CAN-SPAM), 2003
Fraud Enforcement and Recovery Act, 2009

10. Laws Protecting Consumers
Pure Food and Drug Act, 1906
Federal Hazardous Substances Labeling Act, 1960
Truth in Lending Act, 1968
Consumer Product Safety Act,
Fair Credit Billing Act, 1974
Consumer Goods Pricing Act,
Consumer Leasing Act, 1976
Fair Debt Collection Practices Act, 1978
Toy Safety Act, 1984
Nutritional Labeling and Education Act, 1990
Telephone Consumer Protection Act,
Children’s Online Privacy Protection Act, 1998
Do Not Call Implementation Act,
Credit Card Accountability Responsibility and Disclosure Act,
Dodd–Frank Wall Street Reform and Consumer Protection Act (2010)

11. U.S. Laws Promoting Equity and Safety
Equal Pay Act of 1963
Equal Pay Act of 1963 (amended)
Title VII of the Civil Rights Act of (amended in 1972)
Age Discrimination in Employment Act, 1967
Occupational Safety and Health Act, 1970
Title IX of Education Amendments of 1972
Vocational Rehabilitation Act,
Vietnam Era Veterans Readjustment Act, 1974
Pension Reform Act, 1974
Equal Credit Opportunity Act, 1974
Age Discrimination Act, 1975
Pregnancy Discrimination Act, 1978
Immigration Reform and Control Act, 1986
Americans with Disabilities Act,
Civil Rights Act, 1991

12. Sarbanes–Oxley (SOX) Act
Passed to establish a system of federal oversight of corporate accounting practices
Public Company Accounting Oversight Board
Monitors accounting firms that audit public corporations
Jumpstart Our Business Startups (JOBS) Act
Exempts emerging growth companies from observing the auditor attestation requirements from Sarbanes–Oxley 404(b)

13. Sarbanes–Oxley (SOX) Act (continued)
Auditor and analyst independence
Section 201 prohibits registered public accounting firms from providing both non-audit and audit services to a public company
Guarantees whistle-blower protection
Motivates employees to disclose information in a judicial proceeding against the private employer
Compliance costs have reduced over the years

14. Dodd-Frank Wall Street Reform and Consumer Protection Act
Provisions
Created new financial agencies
Office of Financial Research
Financial Stability Oversight Council (FSOC)
Consumer Financial Protection Bureau (CFPB)
Instituted a whistle-blower bounty program

15. Laws that Encourage Ethical Conduct
Federal Sentencing Guidelines for Organizations (FSGO)
Sarbanes–Oxley Act
Dodd–Frank Act
Goal - Require employees to report observed misconduct

16. Federal Sentencing Guidelines for Organizations
Firm must develop a code of conduct that communicates required standards
People in high positions within a company should have an oversight over the program
Individuals with a potential for misconduct should not be put in a position of authority
Establish communications system for disseminating standards and procedures
Employees should be able to report misconduct without retaliation
On detecting misconduct, the firm must take stern action
Organization must prevent similar offenses in the future after a case of misconduct has been discovered

17. Core or Best Practices
Focus on developing structurally sound organizational practices and integrity for financial and nonfinancial performance measures
Voluntary responsibilities
Cause-related marketing
Strategic philanthropy
Social entrepreneurship

18. Importance of Institutionalization in Business Ethics
Institutionalization helps implant values, norms, and artifacts in organizations, industries, and society
Failure to understand core practices provides the opportunity for unethical conduct
Institutionalization of business ethics has advanced rapidly in recent years as stakeholders recognized the need to improve business ethics