The Institutionalization of

Business Ethics
Three dimensions: Legal, Voluntary and Core practices
Institutionalization
• To understand the institutionalization of business ethics it is
important to understand the voluntary action and legally mandated
dimensions of organizational practices(behavior). In addition, there
are core practices that most responsible firms adopt and implement
to achieve acceptable conduct.
• The effective organizational practice of business ethics requires all
three dimensions (legal, voluntary, and core practices) to be
integrated into an ethics and compliance program. This creates an
ethical culture that can effectively manage the risks of misconduct.
Institutionalization
• Institutionalization in business ethics relates to established laws,
customs, and expected organizational programs that are for
establishing reputation of company.
• Deviations from expected conduct often are considered ethical issues
and therefore concern stakeholders.
• Institutions provide requirements, rules, structure, and societal
expectations to reward and allow us to make ethical decision. (main
aim)
 Institutionalization
• Voluntary practices include the beliefs, values, and voluntary contractual
obligations of a business. All businesses engage in some level of
commitment to voluntary activities to benefit both internal and external
stakeholders. (providing benefits to external or internal stakeholders
voluntarily eg CSR)
• Core practices are documented best practices, often encouraged by legal
and regulatory forces(acc to laws) and societal expectations. (behavior set
by organization for their employees eg non differentiated attitude)
• Mandated boundaries are the externally imposed boundaries of conduct,
such as laws, rules, regulations, and other requirements.(laws set by govt)
Institutionalization
• There is a need to maintain an ethical culture, and to manage
stakeholder expectations for appropriate conduct in an organization.
• Organizational decisions on such issues as governance, core practices,
and legal compliance help shape the ethical culture.
• Laws and regulations
• Code of Governance/ core practices
• Voluntary practices.
• Company must follow these 3 steps for institutionalization’s ethic
• Assignment no. 1
• Find out the requirements/law/regulations under three aspects of
managing risk of ethical misconduct by institutions in Pakistan.
• 1. laws by govt for company or business (only names)
• 2. codes of governance / best practices (legal + stakeholder
expectations)
• 3. voluntary actions by company example min 1 social responsibility.
(kisi bhi company ki csr activity)