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Business Ethics
Chapter 1-10
107
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08/01/2012

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Term
Ethics
Definition
the manner by which we try to live our lives according to a standard of "right" or "wrong" behavior-in both how we think and behave toward others and how we would like them to think and behave toward us
Term
Society
Definition
a structured community of people bound together by similar traditions and customs
Term
Culture
Definition
a particular set of attitudes, beliefs, and practices that characterize a group of individuals
Term
Value system
Definition
a set of personal principles formalized into a code of behavior
Term
Intrinsic Value
Definition
The quality by which a value is a good thing in itself and is pursued for its own sake, whether anything comes from that pursuit or not
Term
Instrumental Value
Definition
the quality by which the pursuit of one value is a good way to reach another value.  For example, money is valued for what it can buy rather than for itself
Term
The Golden Rule
Definition
Do unto others as you would have them do unto you
Term
Virtue Ethics
Definition
a concept of living your life according to a commitment to the achievement of a clear ideal-what sort of person would I like to become, and how do I go about becoming that person?
Term
Utilitarianism
Definition
Ethical choices that offer the greatest good for the geatest number of people
Term
Universal Ethics
Definition
Actions that are taken out of duty and obligation to a purely moral ideal rather than based on the needs of the situation, since the universal principles are seen to apply to everyone, everywhere, all the time
Term
Ethical Relativism
Definition
concept that the traditions of your society, your personal opinions, and the circumstances of the present moment define your ethical principles
Term
Applied Ethics
Definition
the study of how ethical theories are put into practice
Term
Ethical Dilemma
Definition
A situation in which there is no obbious right or wrong decision, but rather a right or right answer
Term
Ethical Reasoning
Definition

Looking at the information available to us in resolving an ethical dilemma, and drawing conclusions based on that information in relation to our own ethical standards

 

when we are attempting to resolve an ethical dilemma, we follow this process

Term

Framework developed by Lawrence Kohleberg that presents the argument that we develop a reasoning process over time, moving through 6 distinct stages

 

The 6 Stages are:

Definition

Level 1: Preconventional

Level 2: Conventional

Level 3: Postconventional

Term
Level 1: Preconventional Stage of Ethical Reasoning (Lawrence Kohlberg)
Definition

-Lowest level of moral development

 

-A person's response to a perception of right and wrong is initially directly linked to the expectation of punishment or reward

 

Stage 1) Obedience and punishment orientation: person is focused on avoidance of punishment and defers to power and authority

Stage 2) Individualism, instrumentalism, and exchange: person is focused on satisfying his or her own needs

Term

Level 2: Conventional Stage of Ethical Reasoning (Lawrence Kohlberg)

Definition

at this level, person continues to become aware of broader influences outside the family

 

Stage 3) "Good boy/nice girl" orientation: person is focused on meting expectations of family members

 

Stage 4) Law-and-order orientation: person is increasingly aware of his or her membership in a society and the existence f codes of behavior

Term

Level 3: Postconventional Stage of Ethical Reasoning (Lawrence Kohlberg)

Definition

-highest level of ethical reasoning

 

-person make a clear effort to define principles and oral values that reflect an individual value system rather than simply reflecting the group position

 

Stage 5) Social contract legalistic orientation: person is focused on individual rights and the development of standards based on critical examination-that is, something is right or wrong bcs it has withstood scrutiny by the society in which the principle is accepted

 

Stage 6) Universal ethical principle orientation: person is focused on self-chosen ethical principles that are found to be comprehensive and consistent

Term
Sources of individuals' moral standards
Definition

Friends

Family

Ethnic background

Religion

The media

personal role models and mentors

Term
Arthur Dorbin's 8 questions to consider when resolving an ethical dilemma
Definition
  1. What are the facts?
  2. What can you guess about the facts you don't know?
  3. What do the facts mean?
  4. What does the problem look like through the eyes of the people involved?
  5. What will happen if you choose one thing rather than another?
  6. What do your feelings tell you?
  7. what will you think of yourself if you decide one thing or another?
  8. Can you explain and justify your decision to others?
Term
Business Ethics
Definition
the application of ethical standards to business behavior
Term
Stakeholder
Definition
someone with a share or interest in a business enterprise
Term
Corporate Governance
Definition
the system by which business corporations are directed and controlled
Term
Oxymoron
Definition
the combination of two contradictory terms, such as "deafening silence" or "jumbo shrimp"
Term
Code of Ethics
Definition
a company's written standards of ethical behavior that are designed to guide managers and employees in making the decisions and choices they face every day
Term
Ethical Dilemma
Definition
a situation in which there is no obbious right or wrong decision, but rather a right or right answer
Term
Types of conflict in the resolution of an ethical dilemma
Definition
  • Truth versus loyalty
  • short term versus long term
  • Justice versus mercy
  • Individual versus community
Term
3 Resolution principles once you have reached a decision as to the type of conflict you're facing
Definition
  • Ends-based: which decision would provide the greatest good for the greatest number of people
  • Rules-based: what would happen if everyone made the same decision as you
  • The Golden Rule: do unto others as your would have then do unto you
Term

4 commonly held rationalizations that can lead to misconduct/justify unethical behavior

 

identified by Saul Gellerman

Definition
  1. A belief that the activity is within reasonable ethical and legal limits-that is, that it is not "really" illegal or immoral
  2. A belief that the activity is in the individual's or the corporation's best interests- that the individual would somehow be expected to undertake the activity
  3. A belief that the activity is safe because it will never be found out or publicized
  4. A belief that because the activity helps the company, the company will condone it and even protect the person who engages in it
Term
Stakeholder examples
Definition

Stockholders or shareholders

employees

customers

suppliers/vendor partners

retailers/wholesalers

federal government

creditors

community

Term
Organizational Culture
Definition
the values, beliefs, and norms that all the employees of that organization share
Term
Value Chain
Definition
the key functional inputs that an organization provides in the transofrmation of raw materials into a delivered product or service
Term
Accounting Function
Definition
the function that keeps track of all the company's financial transactions by documenting the money coming in (credits) and money getting out (debits) and balancing the accounts at the end of the period 
Term
GAAP
Definition
The generally accepted accounting principles that govern the accounting profession-not a set of laws and established legal precedents but a set of standard operating procedures within the profession
Term
Conflict of Interest
Definition
a situation in which one relationship or obligation pieces you in direct conflict with an existing relationship or obligation
Term
Key Functions of an Organization
Definition

R&D

Manufacturing

Marketing & Advertising

Sales

Customer Service

 

Term
R&D Ethical Dilemma
Definition
product quality
Term
Corporate Social Responsibility
Definition
The actions of an organization that are targeted toward achieving a social benefit over and above maximizing profits for its shareholders and meeting all its legal obligations.  Also known as corporate citizenship and corporate conscience
Term
Instrumental Approach
Definition

the perspective that the only obligation of a corporation is to maximize profits for its shareholders in providing goods and services that met the needs of its customers

 

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Approach to corporate management states that the only obligation of a corporation is to maximize profits for its shareholders
Term
Social Contract Approach
Definition

the perspective that a corporation has an obligation to society over and above the expectations of its shareholders

 

   approach to corporate management is considered simplistic because it assumes that there are no external consequences to the actions of the corporation
Term
5 major trends behind Corporate Social Responsibility phenomenon
Definition
  • Transparancy
  • Knowledge
  • Sustainability
  • Globalization
  • The failure of the Public Sector
Term
Triple Bottom Line
Definition
Approach where companies provide social and environmental updates alongside their primary bottom line financial performance
Term
Ethical Corporate Social Responsibility
Definition
Purest or most legitimate type of CSR in which organizations pursue a clearly defined sense of social conscience in managing their financial responsibilities to shareholders, their legal responsibilities to their local community and society as a whole, and their ethical responsibilities to do the right thing for all their stakeholders
Term
Altruistic CSR
Definition
philanthropic approach to CSR in which organizations underwrite specific initiatives to give back to the company's local community or to designated national or international programs
Term
Strategic CSR
Definition
Philanthropic approach to CSR in which organizations target programs that will generate the most positive publicity or goodwill for the organization but which runs the greatest risk of being perceived as self-serving behavior on the part of the organization
Term
Corporate Governance
Definition

the system by which business corporations are directed and controlled

 

Concerned with how wel organizations meet their obligations to their stakeholders

 

the way in which boards oversee the running of a company by itsmanagers, and how board members are in turn accountable to shareholders and the company

Term
Board of Directors
Definition

a group of individuals who oversee governance of an organization

 

Elected by vote of the shareholders at the annual general meeting, the true power of the board can vary from institution to institution from a powerful unit that closely monitors the management of the organization to a body that merely rubber-stamps the decisions of the chief executive officer and executive team

Term
Audit Committee
Definition

An operating committee staffed by members of the board of directors plus independent or outside directors

 

this committee is responsible for monitoring the financial policies and procedures of the organization, specifically the accounting policies, internal controls, and the hiring of external auditors

Term
Compensation Committee
Definition

an operating committee staffed by members of the board of directors plus independent or outside directors

 

the committee is responsible for setting the compensation for the CEO and other senior executives.  Typically, this compensation will consist of a base salary, performance bonus, stock options, and other perks

Term
Corporate Governance Committee
Definition
Committee that monitors the ethical performance of the corporation and oversees compliance with the company's internal code of ethics as well as any federal and state regulations on corporate conduct
Term
"Comply or Explain"
Definition
A set of guidelines that require companies to abide by a set of operating standards or explain why they choose not to
Term
"Comply or Else"
Definition
A set of guidelines that require companies to abide by a set of operating standards or face stiff financial penalties
Term
6 Steps towards effective corporate governance
Definition
  1. Create a climate of trust and candor
  2. Foster a culture of open dissent
  3. Mix up roles
  4. Ensure individual accountability
  5. Let the board assess leadership talent
  6. Evaluate the board's performance
Term
Foreign Corrupt Practices Act (FCPA)
Definition

Legislation introduced to control bribery and other less obbious forms of payment to foreign officials and politicians by American publicly traded companies

 

Requires corporations to fully disclose any and all transactions conducted with foreign officials and politicians, in line with the SEC providions

 

Includes wording from the Bank Secrecy Act and Mail Fraud Act to prevent the movement of funds overseas for the express purpose of conducting a fraudulent scheme

Term
Disclosure (Foreign Corrupt Practices Act: FCPA)
Definition
The FCPA requirement that corporations fully disclose any and all transactions conducted with foreign officials and politicians
Term
Prohibition (Foreign Corrupt Practices Act: FCPA)
Definition
the FCPA inclusion of wording from the Bank Secrecy Act and the Mail Fraud Act to prevent the movement of funds overseas for the express purpose of conducting a fraudulent scheme
Term
Facilitation Payments (Foreign Corrupt Practices Act: FCPA)
Definition

payments that are acceptable (legal) provided they expedite or secure the performance of a routine governmental action

 

 

Term
Routine Governmental Action (FCPA)
Definition

Any regular administrative process or procedure, excluding any action taken by a foreign official in the decision to award new or continuing business

 

Examples of routing governmental action:

  • providing permits, licenses, or other official documents to qualify a person to do business in a foreign country
  • processing governmental papers, such as visas and work orders
  • providing police protection, mail pickup and elivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across a country
  • providing phone service, power, and water supply; loading and unloading cardo; or protecting perishable products or commodities from deterioration
Term
Federal Sentencing Guidelines for Organizations (FSGO)
Definition
Ch. 8 of the guidelines that hold businesses liable for the criminal acts of their employees and agents
Term
Culpability Score (FSGO)
Definition

the calculation of a degree of blame or guilt that is used as a multiplier of up to 4 times the base fine.  

 

Score can be adjusted according to aggrevating or mitigating factors

Term
Death Penalty (FSGO)
Definition

A fine that is set high enough to match all the organization's assets-and basically put the organization out of business.  

 

This is warranted where the organization was operating primarily for a criminal purpose

Term
Sarbanes-Oxley Act (SOX)
Definition

a legislative response to the corporate accounting scandals of the early 2000s that covers the financial management of businesses.

 

Contains 11 sections, or titles, and almost 70 subsections covering every aspect of the financial management of businesses

 

each of the sections can be seen to relate directly to prominent examples of corporate wrongdoing that preceded the establishment of the legislation-the Enron scandal in particular

 

 

Term
Public Company Accounting Oversight Board (PCAOB)
Definition
An independent oversight body for auditing companies
Term
Dodd-Frank Wall Street Reform and Consumer Protection Act
Definition
Legislation that was promoted as the "fix" for the extreme mismanagagement of risk in the financial sector that lead to a global financial crisis in 2008-2010
Term
Consumer Financial Protection Bureau (CFPB)
Definition
A government agency within the Federal Reserve that oversees financial products and services
Term
Financial Stability Oversight Council (FSOC)
Definition
A Government agency established to prevent banks from failing and otherwise threatening the stability of the U.S. Economy
Term
Fudiciary Responsibility
Definition

corporate governance is about managers fulfilling a ____________ ___________ to the owners of their companies.  

 

Based on trust

Term
King I report
Definition

incorporated a code of corporate practices and conduct that looked beyond the corporation itself, taking into account its impact on the larger community

 

went beyond the financial and regulatory accountability 

 

took on a more integrated approach to corporate governance, recognizing the involvement of all corporation's stakeholders and the community in which the corporatio operates

 

recognized as advocating the highest standards for corporate governance

Term
King II
Definition

second report released 8 years after King I

 

fromally recognized the need to move the stakeholder model forward and consider a triple bottom line as opposed to the traditional single bottom line of profitability

Term
Monetary Fines Under the FGSO (Federal Sentencing Guidelines for Organizations)
Definition

Step 1) Determination of the "base fine"

Step 2) The culpability Score

Step 3) Determining the Total find Amount

Term
Organizational Probation
Definition

in addition to monetary fines, organizations also can be sentenced to _________ for up to 5 years.  The status can include the following requirements:

 

  • Reporting the business's financial condition to the court on a periodic basis
  • remaining subject to unannounced examinations of all financial records by a designated probation officer and/or court-appointed experts
  • reporting progress in the implementation of a compliance program
  • being subject to unannounced examinations to confirm that the compliance program is in place and is working

 

 

Term
Legal behaviors under the FCPA
Definition

Grease payments

Marketing expenses

Payments lawful under foreign laws

Political contributions

Donations to foreign charities

Term
Compliance Program recommendations to effectively detect and prevent violations of law
Definition
  1. Management oversight
  2. Corporate policies
  3. Communication of standards and procedures
  4. Compliance with standards and procedures
  5. Delegation of substantial discretionary authority
  6. Consistent discipline
  7. Response and corrective action
Term
Revised Federal Sentencing Guidelines for Organizations included 3 key changes
Definition

Required companies to periodically evaluate the effectiveness of their compliance programs on the assumption of a substantial risk that any program is capable of failing

 

Required evidence of actively promoting ethical conduct rather than just complying with legal obligations

 

Defined accountability more clearly

Term
Whistle-Blowers
Definition
an employee who discovers corporate misconduct and chooses to bring it to the attention of others
Term
Internal Whistle Blowing
Definition
An employee discovering corporate misconduct and bringing it to the attention of his or her supervisor, who then follows established procedures to address the misconduct within the organization
Term
External Whisle Blowing
Definition
an employee discovering corporate misconduct and choosing to bring it to the attention of law enforcement agencies and/or the media
Term
5 conditions under which Whisle Blowing is appropriate-ethical
Definition
  • when the company, through a product or decision, wil cause serious and considerable harm to the public or break existing laws
  • when the employee identified a serious threat of harm
  • when the employee's immediate supervisor does not act, the employee should exhaust the internal procedures and chain of command to the board of directors
  • employee must have documented evidence that is convincing to a reasonable, impartial observer that his or her view of the situation is accurate, and evidence that the firm's prctice, product, or policy seriously threatens and puts in danger the public or product user
  • the employee must have valid reasons to believe that revealing the wrongdoing to the public will result in the changes necessary to remedy the situation
Term
When is whistle-blowing unethical
Definition
if there is evidence that the employee is motivated by the opportunity for financial gain or media atention or that the employee is carrying out an individual vendetta against the company
Term
Qui Tam Lawsuits
Definition
a lawsuit brought on behalf of the federal goernment by a whistle-blower under the False Claims Act of 1863
Term
Federal Civil Falst Claims Act (aka "Lincoln's Law") whislte-blower entitlement
Definition

Under this Act, whisle blowers (referred to as "relators") who expose fraudulent behavior against the government are entitled to between 10-30% of the amount recovered

 

 

Term
Whistleblower Protection Act of 1989
Definition

Act addressed the issue of retaliation against federal employees who bring accusations of unethical behavior

 

Act imposed specific performance deadlines to processing whislte blower complaints and guaranteed the annonymity of the whislte blower

 

Act required prompt payment of any portion of the settlement to which the whistle blower would be entitled, even if the case were still working its way through the appeals process

 

Act applied to federal employees

Term
Sarbanes-Oley Act of 2002 (aka Corporate and Criminal Fraud Accountability Act commonly abbreviated to SOX)
Definition

Congress took an integrated approach to the matter of whistle blowing by prohibiting retaliation against whisle blowers and encouraging the act of whistle blowing itself

 

Requires public companies not only to adopt a code of ethics, but also to set up an internal apparatus to receive, review, and solicit employee reports concerning fraud and/or ethical violations

Term
Potential damages to employees who prevail in whisle blower cases
Definition
  • Reinstatement to the same seniority status that the employee would have had but for the adverse employment action
  • Back pay
  • Interest
  • All compensatory damages to make the employee whole
  • "special damages" including litigation costs, reasonable attorney fees and costs, expert witness fees, and "all relief necessary to make the employees whole"

SOX does not provide for punitive damages

Term
suggested mechanisms employers should put in place in the new legal environment surrounding whisle-blowers
Definition
  1. a well-defined process to document how complaints are handled
  2. An employee hotline to file such complaints
  3. A prompt andthourough invesigation of all complaints
  4. a detailed report of all investigations, documenting all corporate officers involved and all actions taken
Term
Whistle-blower hotline
Definition
a telephone line by which employees can leave messages to alert a company of suspected misconduct without revealing their identity
Term
Extranet
Definition
a private piece of company's internet network that is made available to customers and/or vendor partners on the basis of secured access by unique password
Term
Intranet
Definition
company's internal Web site, containing information for employee access only
Term
2 key areas of concern over loss of privacy
Definition
  1. Customers must be aware that companies now have the technical capability to send their personal data to any part of the world to take advantage of lower labor costs
  2. As an employee, you must be aware that employers now have the cpability of monitoring every email you send and Web site you visit in order to make sure that you really are delivering on that promise of increased worker productivity
Term
Telecommuting
Definition
the ability to work outside of your office and log in to your company network
Term
Thin Consent
Definition

Consent in which the employee has little choice.  

 

for ex) when an employee receives formal notification that the company will be monitoring all email and web activity and is made clear of that notification that his or her continued employment with the company will be dependent on the employee's agreement to abide by that monitoring

Term
Thick Consent
Definition

Conset in which the employee has an alternative to unacceptable monitoring

 

for example, if jobs are plentiful and the employee would have no difficulty in finding another position, then the employee has a realistic alternative for avoiding an unacceptable policy

Term
Vicarious Liability
Definition

legal concept that means a party may be held responsible for injury or damage even when he or she was not actively involved in an incident

 

parties that may be charged with this are generally in a supervisory role over the person or parties personally responsible for the injury or damage

 

implications are that the party charged is responsible for the actions of his or her subordinates

Term
Cyberactivity
Definition
a legal concept that employers can be held liable for the actions of their employees in their Internet communications to the same degree as if those employers had written those communications on company letterhead
Term
Less Developed Nation
Definition
country that lacks the economic, social, and technological infrastructure of a developed nation
Term
Developed Nation
Definition
Country that enjoys a high standard of living as measured by economic, social, and technological criteria
Term
Globalization
Definition
the expansion of international trade to a point where national markets have been overtaken by regional trade blocs (Latin America, Europe, Africa) leading eventually to a global market place
Term
Multinational Corporations (MNCs)
Definition

aka transnational corporations

 

company that provides and sells products and serices across multiple national borders.  

 

compay that pursues revenue on the basis of operating strategies that ignore national boundaries as merely bureaucratic obstacles

Term
Ethical Relativism
Definition
gray area in which your ethical principles are defined by the traditions of your society, your personal opinions, and the circumstances of the present moment
Term
Upside of Globalization
Definition
supporters of the upside argue that _____ is bringing improvements in the wealth and standards of living of citizens in developing nations as they leverage their natural resorces or low costs of living to attract foreign investment
Term
Downside of globalization
Definition
advocates for the downside of ______ argue that it is merely promoting the dark side of capitalism onto the global stage-developing countries are ravaged for their raw materials with no concern for the longer term of economic viability of their national exonomies, workers are exploited and corporations are free to take full advantage of less restrictive legal environments
Term
Global Code of conduct
Definition
a general standard of business practice that can be applied equally to all countries over and above their local customs and social norms
Term
Richard DeGeorge's guidelines for organizations doing business in other countries
Definition
  1. do no intentional harm
  2. produce more good than harm for the host country
  3. Contribute to the host country's development
  4. Respec the human rights of their employees
  5. respect the local culture
  6. Pay their fair share of taxes
  7. Cooperate with te local government to develop and enforce just background insitutions
  8. majority control of a firm includes the ethical responsibility of attending to the actions and failures of the firm
  9. MNCs that build hazardous plants are obligated to ensure that the plants are safe and operated safely
  10. MNCs are responsible for redesigning the transfer of hazardous technologies so that such technologies can be safely administered in host countries
Term
UN Global Compact
Definition

A voluntary corporate citizenship initiative endorsing 10 key principles that focus on four key areas of concern: the environment, anticorruption, the welfare of workers around eht world, and global human rights

 

Relies on public accountability, transparency, and the enlightened self-interest of companies, labor, and civil society to initiative and share substantive action in pursuing the principles on which this initiative is based

Term
10 key principles that address the four areas of concern in UN Global Compact
Definition

Human Rights

  1. support and respect the protection of internationally proclaimed human rights
  2. make sure they are not complicit in human rights abuses

Labor Standards

 

  1. uphold the freedom of association and the effective recognition of the right to collective bargaining
  2. uphold the elimination of all forms of forced and compulsory labor
  3. uphold the effective abolition of child labor
  4. uphold the elimination of discrimination in employment and occupation

Environment

  1. support a precautinary approach to environmental challenges
  2. undertake initiatives to promote greater environmental responsibility
  3. encourage the development and diffusion of environmentally friendly technologies

Anticorruption

  1. work against all forms of corruption, including extorion and bribery
Term
OECD Guidelines for Multinational Enterprises
Definition

guidelines that promote principles and standards of behavior in the following areas: human rights, information disclosure, anticorruption, taxation, labor relations, environment, competition, and consumer protection

 

represents a more governmental approach to the same issues featured in the UN's nongovernmental Global compact

 

a governmental initiative endorsed by 30 members of the Organization for Economic Cooperation and Develpment and 9 nonmembers (Argentina, Brazil, Chile, Estonia, Israel, Latvia, Lithuania, romania, and Slovania)

Term

OECD Guidelines fo Multinational Enterprises principles and standards of behavior that draw on the same core values as the UN Global Compact

 

10 "chapters"

Definition
  1. Concepts and Principles
  2. General Policies
  3. Disclosure
  4. Employment and Industrial Relations
  5. Environment
  6. Combating Bribery
  7. Consumer Interests
  8. Science and Technology
  9. Competition
  10. Taxation