Business Ethics

Ethical Decision Making and

Cases, Seventh Edition
O.C. Ferrell
University of New Mexico
John Fraedrich
University of Wyoming For in-class note taking,
Linda Ferrell choose Handouts or Notes
Pages from the print options,
University of New Mexico with three slides per page.

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 Chapter 4
The Institutionalization
of Business Ethics

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 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

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 Boundaries and Core
Practices

• Boundaries
– Voluntary
– Mandated
• Core practices
– Helps ensure compliance with legal
requirements and industry regulation

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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

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 Types of Laws

• Civil
• Criminal
• The difference between the two is
enforcement.

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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

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Laws Protecting Consumers

• Require business to provide accurate

information about products and
services and to follow safety standards
• FTC’s Bureau of Consumer Protection

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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

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 Laws Protecting the
Environment

• Environmental Protection Agency (EPA)

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

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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
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Benefits of Sarbanes-Oxley

• Greater accountability of top managers

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

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 Cost of Compliance

• Estimated at $1 million per $1 billion in

revenues
• Especially compliance with Section 404

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 Philanthropic Issues

• Involves business’s contribution to

the local community and society
• Quality of life issues
• Philanthropic issues
• Strategic philanthropy

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