Ethical Situations In Business - Est1

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Business Ethics

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comprises the principles and standards that guide behavior in the world of business.

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Consumers' Bill of Rights

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

Initially outlined in 1962 by President John F. Kennedy in his "Special Message on Protecting the Consumer Interest”

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social responsibility

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

Part of the field of study of business ethics which began in the 1970s

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Defense Industry Initiative on Business Ethics and Conduct

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Developed to guide corporate support for ethical conduct.

Drafted in 1986 by eighteen defense contractors .

The organization has since grown to nearly fifty members.

This effort established a method for discussing best practices and working tactics to link organizational practice and policy to successful ethical compliance. The DII includes six principles. First, DII supports codes of conduct and their widespread distribution. These codes of conduct must be understandable and provide details on more substantive areas. Second, member companies are expected to provide ethics training for their employees as well as continuous support between training periods. Third, defense contractors must create an open atmosphere in which employees feel comfortable reporting violations without fear of retribution. Fourth, companies need to perform extensive internal audits and develop effective internal reporting and voluntary disclosure plans. Fifth, DII insists that member companies preserve the integrity of the defense industry. Finally, member companies must adopt a philosophy of public accountability

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Federal Sentencing Guidelines for Organizations

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(FSGO), approved by Congress in November 1991.

The guidelines, which were based on the six principles of the DII, codify into law incentives to reward organizations for taking action to prevent misconduct such as developing effective internal legal and ethical compliance programs. Provisions in the guidelines mitigate penalties for businesses that strive to root out misconduct and establish high ethical and legal standards. Under FSGO, if a company lacks an effective ethical compliance program and its employees violate the law, it can incur severe penalties. The guidelines focus on firms taking action to prevent and detect business misconduct in cooperation with government regulation. By taking preventive action against misconduct, a company may avoid onerous penalties should a violation occur. The company must develop corporate values, enforce its own code of ethics, and strive to prevent misconduct.

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Sarbanes–Oxley Act

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Passed by Congress in 2002, the act is the most far-reaching change in organizational control and accounting regulations since the Securities and Exchange Act of 1934. The new law made securities fraud a criminal offense and stiffened penalties for corporate fraud. It also created an accounting oversight board that requires corporations to establish codes of ethics for financial reporting and to develop greater transparency in financial reports to investors and other interested parties. Additionally, the law requires top executives to sign offon their firms' financial reports, and they risk fines and long prison sentences if they misrepresent their companies' financial position. The legislation further requires company executives to disclose stock sales immediately and prohibits companies from giving loans to top managers

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ethical culture

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the character or decisionmaking process that employees use to determine whether their responses to ethical issues are right or wrong. Ethical culture is used to describe the component of corporate culture that captures the rules and principles that an organization defines as appropriate conduct. The goal of an ethical culture is to minimize the need for enforced compliance of rules and maximize principles that contribute to ethical reasoning in difficult or new situations. An ethical culture creates shared values and support for ethical decisions and is driven by top management.