Reflection business ethics


The two topics to talk about
Topic1: Ethical Issues and the Institutionalization of Business Ethics , Chapter 3: Emerging Business Ethics Issue
Talk about the topic above and answer the following questions
potential topics to talk about: 
Question 1: Have anti-dscrimintaion law helped or hurt the fair treatment of workers?
Question 2: Is diversity management an ethical issue?

Part Two
Ethical Issues and the
Institutionalization of
Business Ethics
Chapter 3
Business Ethics
© 2019 Cengage. All rights reserved.
Learning Objectives

Define ethical issues in the context of organizational ethics

Examine ethical issues as they relate to the basic values
of honesty, fairness, and integrity

Delineate misuse of company resources, abusive and
intimidating behavior, lying, conflicts of interest, bribery,
corporate intelligence, discrimination, sexual harassment,
fraud, financial misconduct, insider trading, intellectual
property rights, and privacy as business ethics issues

Examine the challenge of determining an ethical issue in
© 2019 Cengage. All rights reserved.
Ethical Awareness

People make ethical decisions when they find an
ethical component in a particular issue or situation.

Failure to acknowledge or be aware of ethical issues
is hazardous to an organization.
• Ethical issues involve a group, a problem, or an
opportunity that requires introspection and
investigation before a decision can be made.
© 2019 Cengage. All rights reserved.
Values at Work
• Dedication
• Collaboration/ Cooperation/ Effective Communication
• Accountability
• Respect
• Professionalism/ Character
• Attendance/ Punctuality
• Teamwork
• Initiative
• Productivity
• …..
© 2019 Cengage. All rights reserved.
Foundational Values
for Identifying Ethical Issues

© 2019 Cengage. All rights reserved.
Foundational Values
Integrity (1 of 3)
Integrity: Element of virtue, an unimpaired condition;
Steadfast adherence to an ethical code
• Integrity relates to product quality, open
communication, transparency, and relationships.
© 2019 Cengage. All rights reserved.
Foundational Values
Honesty (2 of 3)
Honesty: Truthfulness or trustworthiness; To tell the truth
to the best of your knowledge without hiding anything;
Being sincere and free of deceit
Confucius defined an honest person as junzi, or one who
has the virtue ren.
• Ren: One who has humanity.
• Yi: What one should do according to the relationships
with others.
• Li: Good manners or respect.
• Zhi: Whether a person knows what to say and what to
do as it relates to honesty.
© 2019 Cengage. All rights reserved.
Foundational Values
Honesty (contd.)
Honesty: The Confucian version of Kant’s Golden Rule is
to treat your inferiors as you would want your superiors to
treat you.

Virtues such as familial honor and reputation for honesty
are paramount.
© 2019 Cengage. All rights reserved.
Foundational Values
Fairness (3 of 3)
Fairness: Just, equitable, and impartial
• Three fundamental elements that motivate people to
be fair:
1. Equality: The distribution of benefits and resources.
2. Reciprocity: An interchange of giving and receiving in
social relationships.
3. Impartiality: Free of biases and prejudice
4. Optimization: Trade-off between equity (equality) and
efficiency (maximum productivity).
© 2019 Cengage. All rights reserved.
Ethical Issues in Business
Abusive Behavior (1)

Abusive or Intimidating
Behavior: Actions such as
physical threats, false
accusations, and yelling.
Meaning differs from person
to person.
Bullying: Workplace bullying
is strongly associated with
sleep disturbances, as well
as depression, fatigue,
increased sick days, and
stomach problems.

Creates hostile environment
Source: Adapted from Cathi McMahan, “Are You a Bully?” Inside Seven ,
2019 Cengage.
All rights reserved.
of Transportation
Newsletter, June 1999, 6.
1. Spreading rumors to damage others
2. Blocking others’ communication in the
3. Flaunting status or authority to take
advantage of others
4. Discrediting others’ ideas and opinions
5. Use of e-mails to demean others
6. Failing to communicate or return
7. Insults, yelling, and shouting
8. Using terminology to discriminate by
gender, race, or age
9. Using eye or body language to hurt others
or their reputations
10. Taking credit for others’ work or ideas
Ethical Issues in Business
Lying (2)
(1) Untruthful statements that result in damage or harm
(2) “white lies,” which do not cause damage but instead
function as excuses or a means of benefitting others; and
(3) statements obviously meant to engage or entertain
without malice.
Commission lying: Creating a perception or belief by
words that intentionally deceive the receiver of the
Omission lying: Intentionally not informing others of any
differences, problems, safety warnings, or negative issues
relating to the product or company that significantly affect
awareness, intention, or behavior.
© 2019 Cengage. All rights reserved.
Ethical Issues in Business
Conflicts of Interest (3)
Individual chooses either to advance his or her own
interests, those of the organization, or those of some other
• Intersection of professional and personal interests
• Individuals must separate personal interests from
business dealings
• Is your judgment or objectivity compromised – or
could a third party think it’s compromised — by a
relationship you have with an individual or
© 2019 Cengage. All rights reserved.
Conflict of Interest
◼ Overt bribes and kickbacks
◼ Subtle bribes
◼ Influence
◼ Privileged information
Unethical dual relationship: When a personal and loving
relationship with someone with whom you share
professional responsibilities, causes a conflict of interest or
impairment of professional judgment
© 2019 Cengage. All rights reserved.
Ethical Issues in Business
Bribery (4)
Bribery: Offering something (often money) in order
to gain an illicit advantage from someone in
• Active bribery: The person who promises or gives
the bribe commits the offense.
• Passive bribery: Offense committed by an official
who receives the bribe.

Not an offense if the advantage was permitted or
required by the written law or regulation of the
foreign public official’s country, including case law.
© 2019 Cengage. All rights reserved.
Ethical Issues in Business
Corporate Intelligence (5)
Corporate Intelligence: Collection and analysis of
information on markets, technologies, customers,
and competitors, as well as on socioeconomic and
external political trends.

Three types:

Passive monitoring system for early warning.
Tactical field support.
Support dedicated to top-management strategy.
© 2019 Cengage. All rights reserved.
Ethical Issues in Business
Discrimination (6)
Discrimination: On the basis of race, color, religion,
sex, marital status, sexual orientation, public
assistance status, disability, age, national origin, or
veteran status is illegal in the United States.

Discrimination on the basis of political opinions or
affiliation with a union is defined as harassment.
© 2019 Cengage. All rights reserved.
Ethical Issues in Business
Discrimination (contd.)

Equal Employment Opportunity Commission
Age Discrimination in Employment Act: Illegal to
discriminate against people 40 years of age or older,
as well as those that require employees to retire
before the age of 70.
Affirmative Action Programs: Involve efforts to
recruit, hire, train, and promote qualified individuals
from groups that have traditionally been discriminated
against on the basis of race, gender, or other
© 2019 Cengage. All rights reserved.
Discrimination (contd.)
Affirmative Action Programs
Affirmative Action Programs and Supreme Court
1. There must be a strong reason for developing an
affirmative action program.
2. Affirmative Action Programs must apply only to
qualified candidates.
3. Affirmative Action Programs must be limited and
temporary and therefore cannot include “rigid and
inflexible quotas.”
© 2019 Cengage. All rights reserved.
Ethical Issues in Business
Sexual Harassment (7)
Sexual Harassment: Any repeated, unwanted
behavior of a sexual nature perpetrated upon one
individual by another.

May be verbal, visual, written, or physical.
Can occur between people of different genders or
those of the same gender.
The law is primarily concerned with the impact of
the behavior and not its intent (Title VII of the Civil
Rights Act of 1964).
© 2019 Cengage. All rights reserved.
Ethical Issues in Business
Sexual Harassment (contd.)
Hostile work environment:
• Employee need not prove the harassment seriously
affected his or her psychological well-being or that it
caused an injury.
• Decisive issue is whether the conduct interfered with the
claimant’s work performance.
Three criteria must be met. The conduct was:
1. Unwelcome.
2. Severe, pervasive, and regarded by the claimant as so hostile
or offensive as to alter his or her conditions of employment.
3. Such that a reasonable person would find it hostile or
© 2019 Cengage. All rights reserved.
Ethical Issues in Business
Sexual Harassment (contd.)
Dual relationship: A personal, loving, and/or sexual
relationship with someone with whom you share
professional responsibilities.

If the sexual advances in any form are considered
mutual, then consent is created.
Unless the employee or employer gets something
in writing before the romantic action begins,
consent can always be questioned.
© 2019 Cengage. All rights reserved.
Ways to Avoid Sexual Misconduct
Establish a statement of policy naming someone in the company as
ultimately responsible for preventing harassment at the company.
Establish a definition of sexual harassment that includes unwelcome
advances, requests for sexual favors, and any other verbal, visual, or physical
conduct of a sexual nature; that provides examples of each; and reminds
employees the list of examples is not all-inclusive.
Establish a non-retaliation policy that protects complainants and witnesses.
Establish specific procedures for prevention of such practices at early
stages. If in writing, they are expected by law to train employees in
accordance with them, measure their effects, and ensure the policies are
Establish, enforce, and encourage victims of sexual harassment to report
the behavior to authorized individuals.
Establish a reporting procedure.
Make sure the firm has timely reporting requirements to proper authorities.
© 2019 Cengage. All rights reserved.
Ethical Issues in Business
Fraud (8)
Fraud: Any purposeful communication that deceives,
manipulates, or conceals facts in order to harm
others. Can be a crime; convictions may result in
fines, imprisonment, or both.
• Fraud triangle: Pressure, opportunity, and
© 2019 Cengage. All rights reserved.
Ethical Issues in Business
Fraud (contd.)
Puffery: Exaggerated advertising, blustering, and boasting upon
which no reasonable buyer would rely upon and is not
actionable under the Lanham Act.
Implied falsity: The message has a tendency to mislead,
confuse, or deceive the public.

Literally true but imply a false message.
Literally false

Tests prove (establishment claims): Advertisement cites a
study or test that establishes the claim.
Bald assertions (non-establishment claims): Advertisement
makes a claim that cannot be substantiated.
Labeling Issues

Kroger agreed to remove “raised in a humane
environment” from its packages of chicken.
© 2019 Cengage. All rights reserved.
Ethical Issues: Types of Fraud
• Accounting fraud: Usually involves a corporations’
financial reports.
• Marketing fraud: Dishonestly creating, distributing,
promoting, and pricing products.
• Consumer Fraud: When consumers attempt to deceive
businesses for their own gain.

Collusion: An employee assists the consumer in fraud.
Duplicity: Consumer stages an accident in a store and then
seeks damages against the store for its lack of attention to
Guile: A person who is crafty or understands right/wrong
behavior but uses tricks to obtain an unfair advantage.
© 2019 Cengage. All rights reserved.
Ethical Issues in Business
Insider Trading (9)
Insider Trading: An insider is any officer, director, or owner
of 10 percent or more of a class of a company’s securities.
• Illegal insider trading: The buying or selling of stocks by
insiders who possess information that is not yet public.
• Legal insider trading: Legally buying and selling stock in an
insider’s own company, but not all the time. Insiders are
required to report their insider transactions within two business
days of the date the transaction occurred.
© 2019 Cengage. All rights reserved.
Ethical Issues in Business
Intellectual Property Rights (10)
Intellectual Property Rights: Legal protection of
intellectual property—music, books, and movies.

Copyright Act of 1976
Digital Millennium Copyright Act of 1998
Digital Theft Deterrence and Copyright Damages
Improvement Act of 1999
© 2019 Cengage. All rights reserved.
Voicing your values
• The Golden Rule: “Do unto others as you would have
them do unto you”
• Kant’s Categorical Imperative: “Act as if the maxim
of they action were to become by thy will a universal
law of nature”
• What kind of world would this be if everyone
behaved this way
• Rawls’ Veil of Ignorance – for deciding what’s fair
• “What would decision be if decision makers knew
nothing about their identities or status?”
© 2019 Cengage. All rights reserved.
Determining Ethical Issues in
The ethical decision making process starts when ethical issue
awareness occurs and a discussion begins
Follow sound ethical decision making process
• Gather facts
• Identify and define ethical issues
• Refer to facts
• Identify affected stakeholders
• Identify consequences
• Identify obligations
• Consider your values
• Consider the code of ethics
© 2019 Cengage. All rights reserved.
Part Two
Ethical Issues and the
Institutionalization of
Business Ethics
Chapter 4
of Business Ethics
© 2019 Cengage. All rights reserved.
Learning Objectives

Distinguish between voluntary and mandated boundaries of ethical conduct
Provide specific mandated requirements for legal compliance in subject
matter areas related to competition, consumers, and safety
Describe Sarbanes–Oxley legislation and the Dodd–Frank Wall Street
Reform and Consumer Protection Act along
An overview of regulatory efforts that provide incentives for ethical
Discuss Laws concerning business ethical issues in Canada
An overview of the recommendations and incentives for developing an
ethical corporate culture contained in the FSGO
An overview of highly appropriate core practices and their relationship to
social responsibility
© 2019 Cengage. All rights reserved.
Variations in Employee Conduct
Follow their own
values and beliefs;
believe that their
values are superior
to those of others
in the company
Always try to
follow company
Go along with the
work group
Take advantage of
situations if the
penalty is less than
the benefit and the
risk of being caught
is low
Most unethical behavior is not done for personal
gain, its done to meet performance goals
David Gebbler, ethical consultant
© 2019 Cengage. All rights reserved.
Compliance vs. Values-Based Approaches
▪ Employees more
likely to:
• think company is
protecting itself
• seek advice outside
• be cynical
▪ Less likely to:
• report bad news
• be committed
▪ Employees more
likely to:
• seek advice inside
• be willing to report
• be committed
• support decisions
• be aware of ethical &
legal issues
▪ Less likely to be
Institutions as the Foundation for
Normative Values
Institutions directly impact a firm’s norms, values, behaviors,
as well as the “long-run survival” of the organization
• Institutions are important in establishing a foundation for
normative values
• Organizations face certain normative pressures from different
institutions to act a certain way Internally and/or externally
Categories of institutions: Political, Economic, and Social
When values from political, economic, and social institutions are
embedded into the organizational culture to provide incentives for
appropriate behavior, firms tend to act more socially responsible
© 2019 Cengage. All rights reserved.
Managing Ethical Risk Through
A management-initiated boundary of conduct
(beliefs, values, voluntary policies, and voluntary
contractual obligations)
– Corporate Social Responsibility
– Strategic philanthropy: Giving back to
communities and causes
(documented best
An appropriate and common practice that helps
ensure compliance with legal requirements,
industry self-regulation, and societal expectations
An externally imposed boundary of conduct (e.g.,
laws, rules, regulations)
Core practice
© 2019 Cengage. All rights reserved.
Elements of an Ethical Culture
Artifacts: visible tangible
external symbols of values
and norms
Values: long-term enduring beliefs
(integrity, honesty, fairness)
Norms dictate and clarify desirable behaviors,
through principles, rules, policies, and procedures
© 2019 Cengage. All rights reserved.
Mandated Requirements for Legal
Laws and regulations established by governments to set
minimum standards for responsible behavior—society’s
codification of what is right and wrong.
• Civil law: Defines the rights and duties of individuals
and organizations (including businesses).
• Criminal law: Prohibits specific actions (fraud, theft, or
securities trading violations) and imposes fines or
imprisonment as punishment for breaking the law.
Sources for deriving laws:
• Constitutional law
• Common law
• Statutory law
• Administrative law
© 2019 Cengage. All rights reserved.
Categories of Laws & Regulations
1. Regulation of competition
2. Consumer protection
3. Promotion of equity and safety
4. Protection of natural environment
5. Incentives to develop organizational
compliance programs to deter misconduct
© 2019 Cengage. All rights reserved.
1. U.S. Laws Regulating Competition
(1 of 2)
Sherman Antitrust Act, 1890
Prohibits monopolies
Clayton Act, 1914
Prohibits price discrimination, exclusive dealing, and other efforts
to restrict competition
Federal Trade Commission Act, 1914
Created the Federal Trade Commission (FTC) to help enforce
antitrust laws
Robinson–Patman Act, 1936
Bans price discrimination between retailers and wholesalers
Wheeler–Lea Act, 1938
Prohibits unfair and deceptive acts; false and misleading
Lanham Act, 1946
Protects and regulates brand names, brand marks, trade names,
and trademarks
Celler–Kefauver Act, 1950
Prohibits one corporation from controlling another where the
effect is to lessen competition
Consumer Goods Pricing Act, 1975
Prohibits price maintenance agreements among manufacturers
and resellers in interstate commerce
FTC Improvement Act, 1975
Gives the FTC more power to prohibit unfair industry practices
Antitrust Improvements Act, 1976
Strengthens earlier antitrust laws; gives Justice Department more
investigative authority
© 2019 Cengage. All rights reserved.
Laws Regulating Competition (2 of 2)
Foreign Corrupt Practices Act, 1977
Makes it illegal to pay foreign government officials to facilitate business or to use
third parties such as agents and consultants to provide bribes to such officials
Trademark Counterfeiting Act, 1980
Provides penalties for individuals dealing in counterfeit goods
Trademark Law Revision Act, 1988
Amends the Lanham Act to allow brands not yet introduced to be protected through
patent and trademark registration
Federal Trademark Dilution Act, 1995
Gives trademark owners the right to protect trademarks and requires them to
relinquish those that match or parallel existing trademarks
Digital Millennium Copyright Act, 1998
Refines copyright laws to protect digital versions of copyrighted materials, including
music and movies
Controlling the Assault of NonSolicited Pornography and Marketing
Act (CAN-SPAM), 2003
Bans fraudulent or deceptive unsolicited commercial email and requires senders to
provide information on how recipients can opt out of receiving additional messages
Fraud Enforcement and Recovery Act,
Strengthens provisions to improve the criminal enforcement of fraud laws, including
mortgage fraud, securities fraud, financial institutions’ fraud, commodities fraud,
and fraud related to the federal assistance and relief program
Dodd–Frank Wall Street Reform and
Consumer Protection Act, 2010
Overhaul of the U.S. financial regulatory system
© 2019 Cengage. All rights reserved.
Canada: The Competition Bureau
The Competition Bureau, as an independent law enforcement
agency, ensures that Canadian businesses and consumers
prosper in a competitive and innovative marketplace.
The Bureau is responsible for the administration and
enforcement of
• The Competition Act
• The Consumer Packaging and Labelling Act and Regulations
• The Textile Labelling Act
• The Precious Metals Marking Act
© 2019 Cengage. All rights reserved.
The Competition Act
The Competition Act is a federal law governing most
business conduct in Canada. It contains both criminal and
civil provisions aimed at preventing anti-competitive
practices in the marketplace.
Its purpose is to maintain and encourage competition in Canada in
order to:
• promote the efficiency and adaptability of the Canadian economy
• expand opportunities for Canadian participation in world markets
while at the same time recognizing the role of foreign competition in
• ensure that small and medium-sized enterprises have an equitable
opportunity to participate in the Canadian economy
• provide consumers with competitive prices and product choices.
© 2019 Cengage. All rights reserved.
2. U.S. Laws Protecting Consumers
(1 of 2)
Federal Hazardous Substances
Labeling Act, 1960
Controls the labeling of hazardous substances for household use
Truth in Lending Act, 1968
Requires full disclosure of credit terms to purchasers
Consumer Product Safety Act, 1972
Created the Consumer Product Safety Commission to establish
safety standards and regulations for consumer products
Fair Credit Billing Act, 1974
Requires accurate, up-to-date consumer credit records
Consumer Goods Pricing Act, 1975
Prohibits price maintenance agreements
Consumer Leasing Act, 1976
Requires accurate disclosure of leasing terms to consumers
Fair Debt Collection Practices Act, 1978
Defines permissible debt collection practices
Toy Safety Act, 1984
Gives the government the power to recall dangerous toys quickly
Nutritional Labeling and Education Act, 1990
Prohibits exaggerated health claims and requires all processed
foods to have labels showing nutritional information
Telephone Consumer Protection Act, 1991
Establishes procedures for avoiding unwanted telephone solicitations
Children’s Online Privacy Protection Act, 1998
Requires the FTC to formulate rules for collecting online
information from children under age 13
Do Not Call Implementation Act, 2003
Directs the FCC and the FTC to coordinate so that their rules are
consistent regarding telemarketing call practices including the Do
Not Call Registry and other lists, as well as call abandonment
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Laws Protecting Consumers (2 of 2)
Credit Card Accountability Responsibility
and Disclosure Act, 2009
Implemented strict rules on credit card companies regarding topics such as
issuing credit to youth, terms disclosure, interest rates, and fees
Dodd–Frank Wall Street Reform and
Consumer Protection Act, 2010
Promotes financial reform to increase accountability and transparency in the
financial industry, protects consumers from deceptive financial practices, and
establishes the Bureau of Consumer Financial Protection
Reverse Mortgage Stabilization Act, 2013
Established more requirements to improve the fiscal safety and
soundness of the reverse mortgage program to consumers
Supervisory Privilege Parity Act, 2014
Amended the Consumer Financial Protection Act of 2010 to specify that
privilege and confidentiality are maintained when information is shared by
certain non-depository covered persons with federal and state financial
regulators, and for other purposes
E-Warranty Act, 2015
Allows manufacturers to meet warranty and labeling requirements for
consumer products by displaying the terms of warranties on websites, and for
other purposes
Federal Cybersecurity Enhancement Act,
To improve federal network security and authorize and enhance an existing
intrusion detection and prevention system for civilian federal networks
Consumer Review Fairness Act, 2016
Prohibits the use of certain clauses in form contracts that restrict the ability of
a consumer to communicate regarding the goods or services offered in
interstate commerce that were the subject of the contract, and for other
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3. U.S. Laws Promoting Equity and
Safety (1 of 2)
Equal Pay Act of 1963 (amended)
Prohibits sex-based discrimination in the rate of pay to men and
women doing the same or similar jobs
Title VII of the Civil Rights Act of
1964 (amended in 1972)
Prohibits discrimination in employment on the basis of race, color,
sex, religion, or national origin
Occupational Safety and Health
Act, 1970
Designed to ensure healthful and safe working conditions for all
Title IX of Education Amendments
of 1972
Prohibits discrimination based on sex in education programs or
activities that receive federal financial assistance
Pension Reform Act, 1974
Designed to prevent abuses in employee retirement, profit-sharing,
thrift, and savings plans
Equal Credit Opportunity Act, 1974
Prohibits discrimination in credit on the basis of sex or marital status
© 2019 Cengage. All rights reserved.
U.S. Laws Promoting Equity and
Safety (2 of 2)
Age Discrimination Act, 1975
Prohibits discrimination on the basis of age in federally
assisted programs
Pregnancy Discrimination Act, 1978
Prohibits discrimination on the basis of pregnancy, childbirth,
or related medical conditions
Immigration Reform and Control Act,
Prohibits employers from knowingly hiring a person who
is an unauthorized alien
Americans with Disabilities Act, 1990
Prohibits discrimination against people with disabilities
and requires that they be given the same opportunities
as people without disabilities
Civil Rights Act, 1991
Provides monetary damages in cases of intentional
employment discrimination
Don’t Ask, Don’t Tell Repeal Act, 2011
Act banned discrimination on the basis of sexual
orientation in the military
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The Sarbanes–Oxley (SOX) Act (1 of 4)
Passed in 2002 to:
Establish a system of federal oversight of corporate
accounting practices.
• Makes fraudulent financial reporting a crime
• Strengthened corporate fraud penalties
• Requires corporations to establish codes of
ethics for financial reporting (section 406)
• Must demonstrate greater transparency in
financial reporting to investors and other
© 2019 Cengage. All rights reserved.
The Sarbanes–Oxley (SOX) Act (2 of 4)
Public Company Accounting Oversight Board
• Monitors/establishes standards and rules for auditors.
• Has investigatory and disciplinary power over auditors and
securities analysts.
• Attempts to eliminate conflicts of interest by prohibiting
accounting firms from providing both auditing and consulting
services to the same client companies without special
permission from the client firm’s audit committee.
• Limits the length of time lead auditors can serve a particular
© 2019 Cengage. All rights reserved.
The Sarbanes–Oxley (SOX) Act (3 of 4)
Auditor and Analyst Independence
• Section 201 prohibits registered public accounting firms from
providing both non-audit and audit services to a public
• All material off-balance-sheet transactions and other
relationships with unconsolidated entities that affect current or
future financial conditions of a public company must be
disclosed in each annual and quarterly financial report.
• Public companies must report “on a rapid and current basis”
material changes in their financial condition or operations.
© 2019 Cengage. All rights reserved.
The Sarbanes–Oxley (SOX) Act (4 of 4)
Whistle-Blower Protection
• Granted special damages and attorneys’ fees.
Cost of Compliance
• Section 404 requires companies to document both the
results of financial transactions and the processes they
used to generate them.
© 2019 Cengage. All rights reserved.
Strong Economy Act
Bill 198
Canadian Sarbanes-Oxley Act (CSOX)
© 2019 Cengage. All rights reserved.
Dodd–Frank Wall Street Reform
and Consumer Protection Act (1 of 2)
16 provisions to improve the quality of financial data
available to government officials and creating a better
system of analysis for the financial industry.
The Financial Stability Oversight Council (FSOC)
• Responsible for maintaining the stability of the financial
system in the U.S. through monitoring the market,
identifying threats, promoting market discipline among the
public, and responding to major risks that threaten stability.
• Has the authority to limit or closely supervise financial risks,
create stricter standards for banking and nonbanking
financial institutions, and disband financial institutions that
present a serious risk to market stability
© 2019 Cengage. All rights reserved.
Dodd–Frank Wall Street Reform
and Consumer Protection Act (2 of 2)
Consumer Financial Protection Bureau (CFPB)
• Independent agency within the Federal Reserve System that
“regulate(s) the offering and provision of consumer financial products or
services under the Federal consumer financial laws.”
• Power over credit markets as well as authority to monitor lenders and
ensure they are in compliance with the law.
• Curtail unfair lending and credit card practices, enforce consumer
financial laws, and check the safety of financial products before their
launch into the market.
Whistle-Blower Bounty Program
Whistle-blowers are eligible to receive 10 to 30 percent of fines and
settlements if their reports result in convictions of more than $1 million in
© 2019 Cengage. All rights reserved.
Laws That Encourage Ethical
Conduct (1 of 2)
Law: U.S. Sentencing Guidelines for Organizations created for federal prosecutions of
organizations. These guidelines provide for just punishment, adequate deterrence, and
incentives for organizations to prevent, detect, and report misconduct. Organizations need to
have an effective ethics and compliance program to receive incentives in the case of
Amendments: The definition of an effective ethics program now includes the development of
an ethical organizational culture. Executives and board members must assume the
responsibility of identifying areas of risk, providing ethics training, creating reporting
mechanisms, and designating an individual to oversee ethics programs.
Additional definition of a compliance and ethics program: Firms should focus on due
diligence to detect and prevent misconduct and promote an organizational culture that
encourages ethical conduct. More details are provided, encouraging the assessment of risk
and outlining appropriate
steps in designing, implementing, and modifying ethics programs and training that will
include all employees, top management, and the board or governing authority. These
modifications continue to reinforce the importance of an ethical culture in preventing
© 2019 Cengage. All rights reserved.
Laws That Encourage Ethical
Conduct (2 of 2)
Amendments for reporting to the board: Chief compliance officers are directed to make their
reports to their firm’s board rather than to the general counsel. Companies are encouraged to
create hotlines, perform self-audit programs, and adopt controls to detect misconduct
internally. More specific language has been added to the word prompt in regard to what it means
to promptly report misconduct. The amendment also extends operational responsibility to all
personnel within a company’s ethics and compliance program.
The commission investigated how the sentencing guidelines could be used by regulatory and law
enforcement agencies to recommend effective ethics and compliance programs. The commission
assessed its efforts to encourage corporations, nonprofits, government agencies, and other
organizations to form institutional cultures that discourage misconduct.
The commission continued to emphasize the importance of the organizational culture and that
there should be standards and procedures in place to prevent and detect misconduct. In addition,
when there is misconduct, community service may be ordered if it is designed to remedy the
Source: “U.S. Sentencing Guidelines Change? Become Effective November 1,” FCPA Compliance and Ethics Blog, November 2, 2010, https://
aspx?Redirected=true (accessed February 25, 2015); United States Sentencing Commission, Amendments to the Sentencing Guidelines, April 30, 2012, (accessed April 15, 2017); Paula
Desio, Deputy General Counsel, An Overview of the Organizational Guidelines,
ORGOVERVIEW.pdf (accessed February 25, 2015).
© 2019 Cengage. All rights reserved.
Federal Sentencing Guidelines for
Organizations (FSGO) (1 of 3)
Passed in 1991: Seeks to improve financial regulation, increase
oversight of the industry, and prevent the types of risk-taking,
deceptive practices, and lack of oversight that led to the 2008–
2009 financial crisis.

Contains 16 provisions that include increasing the
accountability and transparency of financial institutions,
creating a bureau to educate consumers in financial literacy
and protect them from deceptive financial practices,
implementing additional incentives for whistle-blowers,
increasing oversight of the financial industry, and regulating
the use of complex derivatives.
© 2019 Cengage. All rights reserved.
Federal Sentencing Guidelines for
Organizations (FSGO) (2 of 3)
FSGO Steps to demonstrate due diligence
1. A firm must develop and disseminate a code of conduct that
communicates required standards and identifies key risk areas for
the organization.
2. High-ranking personnel in the organization who are known to abide
by the legal and ethical standards of the industry (ethics officer,
vice president of human resources, general counsel, etc.) must
have oversight over the program.
3. No one with a known propensity to engage in misconduct should
be put in a position of authority.
4. A communications system for disseminating standards and
procedures (ethics training) must also be put into place.
© 2019 Cengage. All rights reserved.
Federal Sentencing Guidelines for
Organizations (FSGO) (3 of 3)
FSGO Steps
5. Organizational communications should include a way for
employees to report misconduct without fearing retaliation, such
as an anonymous toll-free hotline or an ombudsman. Monitoring
and auditing systems designed to detect misconduct are also
6. If misconduct is detected, the firm must take appropriate and fair
disciplinary action. Individuals both directly and indirectly
responsible for the offense should be disciplined. In addition, the
sanctions should be appropriate for the offense.
7. After misconduct has been discovered, the organization must
take steps to prevent similar offenses in the future. This usually
involves making modifications to the ethical compliance program,
conducting additional employee training, and issuing
communications about specific types of conduct.
© 2019 Cengage. All rights reserved.
Canadian Sentencing Commission
A Values and Evidence Approach to Sentencing Purposes
and Principles
Canadian Centre for Ethics and Corporate Policy
Go to Resources for articles and speeches
e.g., Translating values and behavior into sustained action:
The Conference Board of Canada (find topics)
© 2019 Cengage. All rights reserved.
Laws in Canada
Canadian Charter of Rights and Freedoms: protection of the following
• fundamental freedoms, democratic rights
• the right to live and seek employment anywhere in Canada
• legal rights (life, liberty and personal security)
• equality rights for all
• the official languages of Canada
• minority language education rights
• Canada’s multicultural heritage
• Indigenous peoples’ rights
Canadian Human Rights Commission: Everyone in the world
is entitled to the same fundamental human rights (universally agreed).
There are 30 of them! They include the right to live free from torture, the
right to live free from slavery, the right to own property, and the right to
equality and dignity, and to live free from all forms of discrimination.
© 2019 Cengage. All rights reserved.
Laws in Canada
Canada’s federal Pay Equity Act (2018). The purpose is to create
a proactive pay equity regime within the federal, public, and private
sectors to ensure equal pay to men and women for work of equal
Official Language Act (1985): that English and French are the
official languages of Canada and have equality of status and equal
rights and privileges
The Privacy Act (1985): protect the privacy of individuals with
respect to personal information about themselves held by a
government institution and that provide individuals with a right of
access to that information.
Employment Standards Act (2000): parts for continuity of
employment, wages, gratuities, records, overtime, holidays…
Justice Laws Website
© 2019 Cengage. All rights reserved.
Business Laws and Regulations
4. Protecting the environment
Environmental conservation and protection

Protect oceans, lakes and rivers
Protected areas (National parks, migratory bird sanctuaries,
National Wildlife Areas and areas of marine protection)
Wildlife (environmental and wildlife protection laws for cleaner and
healthier communities)
Climate change
Canadian Environmental Protection Act, 1999.
Sustainable development through pollution prevention.

Canadian Environmental Protection Act
Fisheries Act
Transportation of Dangerous Goods
Species at Risk Act
Migratory Birds Convention Act
Nuclear Safety and Control Act
© 2019 Cengage. All rights reserved.
Core (Best) Practices
Voluntary Responsibilities
Major benefits to society
Improve quality of life and make communities the places where people
want to do business, raise families, and enjoy life.
Makes it easier to attract and retain employees and customers.
Reduce government involvement by providing assistance to
Develop employee leadership skills.
Create an ethical culture and values that act as a buffer to
organizational misconduct.
Cause-Related Marketing

Ties an organizations product(s) directly to a social concern through a
marketing program.
Affects buying patterns
© 2019 Cengage. All rights reserved.
Core (Best) Practices
Strategic Philanthropy
Synergistic and mutually beneficial use of an organization’s core competencies
and resources to deal with key stakeholders so as to bring about organizational
and societal benefits; Should pertain to the mission and operations of the
company; Must have strong support from top managers.
Social Entrepreneurship
Founded with the purpose of creating social value.
• Can be for-profit, nonprofit, government-based, or hybrids.
• Many social entrepreneurs choose to organize their enterprises as nonprofits.
• Directly implement their programs and are organized around achieving social
The major difference between a social enterprise and a nonprofit is the use of entrepreneurial principles
and business-led strategies to create social change.
© 2019 Cengage. All rights reserved.
Importance of Institutionalization
in Business Ethics

Institutionalization helps implant values, norms, and
artifacts in organizations, industries, and society.
Failure to understand core practices provides the
opportunity for unethical conduct.
Institutionalization of business ethics has advanced
rapidly in recent years as stakeholders recognized
the need to improve business ethics.
© 2019 Cengage. All rights reserved.
Compliance vs. Values-Based Approaches
• Rooted in law & regulations
• Reactive
• Limited sr. mgt involvement
• Obvious penalties
• “Signatures required”
• Rooted in culture & driven by
• Proactive and aspirational
• Commitment from senior mgmt
• Aligned with performance
Combination of Compliance and Values Approach
– Proactive and Affirmative
In your Organization…
• Do all employees receive copies of the policy manual,
values or mission statement, conduct code?
• Does everyone receive ethics training?
• Have you ever read the policy manual or conduct code
or other materials relating to ethics?
• Is your company saying one thing in its printed
materials and doing another?
• Who conducts ethics training in your organization? Are
they — to the best of your knowledge — ethical?
• Who answers the company hotline? Who resolves the
issues raised on the hotline? Is the hotline confidential?
© 2019 Cengage. All rights reserved.

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