GEB 4455 Chapter 4: Ch 4 notes
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Department
Management
Course Code
GEB 4455
Professor
William A Christiansen

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Ch 4 notes • The effective organizational practice of business ethics requires all three dimensions (legal, voluntary, and core practices) to be integrated into ethics and compliance programs Managing ethical risk through mandated and voluntary programs • Voluntary practices include the beliefs, values, and voluntary contractual obligations of a business o All businesses engage in some level of commitment to voluntary activities to benefit both internal and external stakeholders • Most firms engage in philanthropy- giving back to communities and causes o Strong evidence to suggest that voluntary corporate social responsibility practices provide benefits to stakeholders and increases performance • Core practices are document best practices, often encouraged by legal and regulatory forces as well as industry trade associations • The better business bureau is a leading self-regulatory body that provides directions for managing customer disputes and reviews advertising cases • Mandated boundaries are externally imposed boundaries of conduct, such as laws, rules, regulations, and other requirements o Antitrust and consumer protection laws create boundaries that must be respected by companies • Organizations need to maintain an ethical culture and manage stakeholder expectations for appropriate conduct. They achieve these ends through corporate governance, compliance, risk management, and voluntary activities • Corporate governance is structured by a governing authority that provides oversight as well as checks and balances to ensure that the organization meets its goals and objectives for ethical performance • Risk management analyzes the probability or chance that misconduct could occur based on the nature of the business and its exposure to risky events • Voluntary activities often represent the values and responsibilities that firms accept in contributing to stakeholder needs and expectations Mandated requirements for legal compliance • Laws and regulations are established by governments to set minimum standards for responsible behavior- societys codification of what is right and wrong • Laws regulating business conduct are passed because some stakeholders believe business cannot be trusted to do what is right in certain areas, such as consumer safety and environmental protection • The thrust of most business legislation can be summed up as follows: any practice is permitted that does not substantially lessen or reduce competition or harm consumers or society • Courts differ in their interpretation of what constitutes a substantial reduction of competition • Laws are categorized as either civil or criminal o Civil law defines the rights and duties of individuals and organizations (including businesses) o Criminal law not only prohibits specific action but also imposes fines or imprisonment as punishment for breaking the law o The primary difference between civil and criminal law is that the state or nation enforces criminal law, whereas individuals enforce civil law • Most of the laws and regulations that govern business activities fall into one of five groups: 1) regulation of competition, 2) protection of consumers, 3) promotion of equity and safety, 4) protection of the natural environment, 5) incentives to encourage organizational compliance programs to deter misconduct • Laws regulating competition o The issues surrounding the impact of competition on businesses social responsibility arise from the rivalry among businesses for customers and profits o Size frequently gives some companies an advantage over others. Large firms can often generate economies of scale that allow them to put smaller firms out of business o The primary objective of US antitrust laws is to distinguish competitive strategies that enhance consumer welfare from those that reduce it o Intense competition also leads companies to resort to corporate espionage- the act of illegally taking information from a corporation through computer hacking, theft, intimidation o Laws have been passed to prevent the establishment of monopolies, inequitable pricing practices, and other practices that reduce or restrict competition among businesses. These laws are sometimes called procompetitive legislation because they were enacted to encourage competition and prevent activities that restrain trade • Laws protecting consumers o Laws that protect consumers require businesses to provide accurate information about their goods and services and follow safety standards o The first consumer protection law was passed in 1906, partly in response to a nov
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