Social Responsibilities and Ethics Ch 4

Flashcard maker : Lily Taylor
Voluntary practices
Beliefs, values, and voluntary contractual obligations of a business.
Giving back to communities and causes.
Voluntary boundary
A management-initiated boundary of conduct (beliefs, values, voluntary policies, and voluntary contractual obligations).
Core practice
A highly appropriate and common practice that helps ensure compliance with legal requirements, industry self-regulation, and societal expectations. Documented best practices.
Mandatory boundary
An externally imposed boundary of conduct (laws, rules, regulations, and other requirements). Antitrus and consumer protection laws create boundaries that must be respected by companies.
Better Business Bureau
Leading self-regulatory body that provides directions for managing customer disputes and reviews advertising cases.
Risk management
Analyzes the probability or chance that misconduct could occur based on the nature of the business and its exposure to risky events.
Voluntary activities
Often represent the values and responsibilities that firms accept in contributing to stakeholder needs and expectations.
Elements of an Ethical Culture
Center: Culture
Outer center: Values, norms, artifacts, behavior
Outside: Voluntary actions, governance, core practices, legal compliance
Laws and regulations
Established by government to set minimum standards for responsible behavior–society’s codification of what is right and wrong.
Categories of laws:
1. Civil law
2. Criminal law
Civil law
Defines the rights and duties of individuals and organizations (including businesses). Individuals enforce.
Criminal law
Only prohibits specific actions-such as fraud, theft, or securities trading violations–but also imposes fines or imprisonment as punishment for breaking the law. State or nation enforce.
4 Sources criminal and civil laws are derived from:
1. US Constitution- constitutional law
2. Common Law — precedents established by judges
3. Statutory law — federal and state laws or statutes
4. Administrative law — Federal and state administrative agencies.
The Consumer Financial Protection Bureau
Established after the latest financial crisis.
The primary method of resolving conflicts and serious business ethics disputes.
Business can avoid costly lawsuits by settling out of court.
5 Groups of laws
1. Regulations of competition
2. Protection of consumers
3. Promotion of equity and safety
4. Protection of the natural environment
5. Incentives to encourage organizational compliance programs to deter misconduct.
Corporate espionage
The act of illegally taking information from a corporation through computer hacking, theft, intimidation, sorting through trash, and impersonation of organizational members.
Precompetitive legislation
Laws have been passed to prevent the establishment of monopolies, inequitable pricing practices, and other practices that reduce or restrict competition among businesses.
Sherman Antitrust Act of 1890
Prohibits organizations from holding monopolies in their industry.
Robinson-Patman Act of 1936
Bans price discrimination between retailers and wholesalers.
McCarran-Ferguson Act of 1944
Congress exempted the insurance industry from the Sherman Antitrust Act and other antitrust laws.
Clayton Act 1914
Prohibits price discrimination, exclusive dealing, and other efforts to restrict competition.
Federal Trade Commission Act 1914
Help enforce antitrust laws.
Wheeler-Lea Act 1938
Prohibits unfair and deceptive acts regardless of whether competition is injured.
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 to interstate commerce. Prohibits price maintenance agreements.
FTC Improvement Act 1975
Gives the FTC more power to prohibit unfair industry practices.
Antitrust Improvements Act 1976
Strengthens earlier antitrust laws; gives Justice Dept. more investigative authority.
Trademark Counterfeiting Act 1980
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 Non-Solicited 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 Recover Act 2009
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.
First consumer protection law
Passed in 1906 partially in response to a novel by Upton Sinclair, “The Jungle”, which described, among other things, the atrocities and unsanitary conditions of the meatpacking industry in turn-of-the-century Chicago. The outrage of the public resulted in the Pure Food an Drug Act of 1906.
Food and Drug Act 1906
Prohibits adulteration and mislabeling of foods and drugs sold in interstate commerce.
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 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 collection 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.
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.
Ralph Nader
Tremendous impact on consumer protection laws with his book “Unsafe at Any Speed”. Critique on GM Corvair
Took the lead on scams directed at seniors by conducting police sweeps of suspected scams, increasing fines, and amending laws to impose increased penalties for those who prey on the elderly.
Regulates food safety, human drugs, tobacco, dietary supplements, vaccines, veterinary drugs, medical devices, cosmetic products that give off radiation, and biological products.
Title VII of the Civil Rights Act
Most important to business. Specifically prohibits discrimination in employment on the basis of race, sex, religion, color, or national origin.
Enforces the act and makes regular surprise inspections to ensure businesses maintain safe working environments.
Increased potential for accidents
Greater turnover in organization due to downsizing means employees may have more responsibilities and less experience in their current positions–overworked employees.
The glue that holds businesses and their stakeholders together.
Overseers. People that must trust and be trusted to make business work properly–include accountants, lawyers, financial rating agencies, financial reporting services, risk assessors to financial products.
Measure and disclose financial information with an assurance of accuracy to the public.
Sarbanes-Oxley Act 2002
Passed due to widespread corporate accounting scandals. 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. Also places limits on the length of time lead auditors can serve a particular client. Provides protection for whistle-blowers. Transparency.
Public Company Accounting Oversight Board
Monitors accounting firms auditing public corporations and establishes standards and rules for auditors in accounting firms.
Costs associated with Sarb-Ox Act
1. Internal
2. External
3. Auditor fees
Dodd-Frank Act 2010 most notable provisions:
1. Created 2 new financial agencies: 1)Office of Financial Research–Improve the quality of financial data available to government officials and creating a better system of analysis for the financial industry. 2)Financial Stability Oversight Council–Maintain the stability of the financial system of the US through monitoring the market, identifying threats, promoting market discipline among the public, and responding to major risks that threaten stability.
Consumer Financial Protection Bureau
Created by Dodd-Frank. Independent agency in the Federal Reserve that regulates the offering and provision of consumer financial products or services under the Federal consumer financial laws. Also has the responsibility to curtain unfair lending and credit card practices, enforces consumer financial laws, and check the safety of financial products before their launch in the market.
Federal Sentencing Guidelines for Organizations (FSGO) 1991
Create an incentive for organizations to develop and implement programs designed to foster ethical and legal compliance. Apply to all felonies and class A misdemeanors committed by employees in association with their work.
FSGO Amendment 2004
Requires a business’s governing authority be well informed about its ethics programs with respect to content, implementation, and effectiveness.
FSGO Amendment 2007-2008
Extend the required ethics training members of the board or governing authority, high-level personnel, employees, and organizations’ agents. Mandatory training to all levels of the organization. Requires most governmental contractors to provide ethics and compliance training.
1st Amendment to FSGO implemented in 2010
Concerned chief compliance officers who report misconduct to the general counsel.
3rd Amendment to FSGO implemented in 2010
Added more specific language of the word “prompt” to help employees recognize what it means to report an ethical violation promptly.
4th Amendment to FSGO implemnted in 2010
Amended the extent of operational responsibility to apply to all personnel within a company’s ethics and compliance program.
Federal Sentencing Commissions Amendments 2012
Proposed increased penalties for certain types of securities fraud. 4 levels of offense for financial institution fraud: 1)whether the fraud caused the institution to become insolvent 2)whether it forced the institution to reduce benefits to pensioners or the insured 3)whether it caused the institution to become unable demand to fully refund a deposit, payment, or investment 4)whether it depleted the assets of the institution to such an extent it was forced to merge with another institution.
Focus of core practices
Developing structurally sound organizational practices and integrity for financial and non-financial performance measures, rather than on an individual’s morals.
Most ethical issues relate to
Non-financials such as marketing, human resource management, and customer relations.
4 major benefits to society businesses provide when they address their voluntary responsibilities:
1. Improve the quality of life.
2. Reduce government involvement.
3. Develop employee leadership skills.
4. Code of ethics.
Cause-related marketing
Ties an organization’s product(s) directly to a social concern through a marketing program. Buying patterns are affected.
Successful cause-related marketing
Consumers must sympathize with the cause. The brand and cause must be perceived as a good fit, and consumers must be able to transfer their feelings about the cause to their brand perceptions and purchase intentions.
Weaknesses of cause-related marketing
Consumers may perceive as a publicity stunt, especially if they cannot understand the link between the campaign and the company’s business practices. Consumers may not adequately associate the business with the cause.
Strategic philanthropy
The 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. Must have at least one long-term positive impact.
Embeds values, norms, and artifacts in organizations, industries, and society. Advanced rapidly in the last 20 years as stakeholders recognize the need to improve business ethics.

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