IV. CORPORATE ETHICS
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LEARNING OBJECTIVE 3
Distinguish between compliance-based and integrity-based ethics codes, and list the five steps
in setting up a corporate ethics code. (Text pages
116-118)
A. Most companies have a formal code of ethics by which employees must abide.
1. Eighty-nine percent of corporations
have written codes of ethics—90% of
large companies do.
2. Although ethics codes vary greatly,
they can be classified into two major
categories: compliance-based and integrity-based.
a. COMPLIANCE-BASED ETHICS
CODES prevent unlawful behavior
by increasing control and by penalizing wrongdoers.
b. INTEGRITY-BASED ETHICS
CODES define the organization’s
guiding values and create an environment that supports ethically
sound behavior; it stresses a
shared accountability among employees.
3. A five-step process can help improve
America’s business ethics.
a. Top management must adopt and
unconditionally support an explicit
code of conduct.
b. Employees must understand that
expectations for ethical behavior
begin at the top and all employees
are expected to act ethically.
c. Managers and others must be
trained to consider the ethical implications of all business deci4.1
POWERPOINT 4-7
Corporate Ethics (Refers to
text pages 116-118)
BONUS INTERNET
EXERCISE 4-2
Researching Codes of
Ethics
Most companies publish
codes of ethics to provide
ethical guidelines for employees. This Internet exercise directs students to research these codes of ethics
on the Internet. (See complete exercise on page
4.Error! Bookmark not
defined. of this manual.)
TEXT FIGURE 4.2
Strategies for Ethics Management (Box in text on
page 116)
BONUS CASE 4-2
Is It Time for a NYSE Code
of Ethics?
Doctors have a code of ethics. Advertisers have a code
of ethics. Is it time for the
NYSE to enact a code of
ethics? (See complete case,
discussion questions, and
suggested answers on page
4.Error! Bookmark not
defined. of this manual.)
sions.
d. Outsiders such as suppliers, subcontractors, distributors, and customers must be told about the ethics program.
e. The ethics code must be enforced.
i. If rules are broken, consequences should follow quickly.
ii. Enforcement shows employees that the code is serious
and cannot be broken.
iii. Phone lines should be established so that employees who
don’t want to be seen with an
ethics officer can ask about
ethical matters anonymously.
B. Sarbanes-Oxley
1. SARBANES-OXLEY ACT (SOX) is
legislation passed in 2002 that set up
new standards for ethical codes of
conduct within organizations.
2. The law was passed in response to
the ethical scandals of the early
2000s.
3. The Act has several components:
a. WHISTLEBLOWERS, people who
report illegal or unethical behavior,
received greater protection.
b. It set forth new penalties for
boards of directors, accounting
firms, and management.
c. CEOs actually have to sign off on
the financials.
d. The Act founded a new public
4.2
BONUS CASE 4-3
Raven Biotechnology: If It
Isn’t Ethical, It Isn’t Right
(Video Case)
This bonus case ties in with
the video available for use
with this chapter. Raven Biotechnologies develops innovating treatment for serious
cancer illnesses, integrating
ethics into every business
decision. (See complete case,
discussion questions, and
suggested answers on page
4.Error! Bookmark not
defined. of this manual.)
INTRODUCTION TO BUSINESS: Instructor’s Resource Manual
4.
5.
6.
agency that oversees, regulates,
and inspects accounting firms.
Sarbanes-Oxley affects people in all
areas of the business.
a. Certain paperwork must be kept
for specific time periods.
Some think Sarbanes-Oxley is flawed.
a. SOX only applies to companies
that are publicly traded.
b. Private companies are not held to
the same standards.
c. It also takes considerable time
and money to implement the Act’s
provisions.
The law is one of the most farreaching laws of its kind.
SELF CHECK QUESTIONS (Text page 118)
1.
Define ethics.
2.
What makes ethical decision making challenging?
3.
What was the most recent ethical decision you had to
make? After you reflected on your decision, did you
feel it was the right one? Why or why not?
4.
Do you think compliance-based ethics or integritybased ethics are best used in a small company? Why?
5.
What is a whistleblower?
CHAPTER 4: Demonstrating Ethical Behavior and Social Responsibility
4.3