CHAPTER 4 Demanding Ethical and Socially Responsible Behavior

Vocabulary flashcards covering key concepts from CHAPTER 4 on ethical and socially responsible behavior.

Ethics

Standards of moral behavior accepted by society; what is right vs. wrong; extends beyond legality and guides how we should treat others.

Legality

The status of being in accordance with the law; narrower than ethics and does not by itself ensure ethical conduct.

Compliance-based ethics code

A code that emphasizes preventing unlawful behavior by increasing control, penalties, and monitoring to ensure compliance with laws.

Integrity-based ethics code

A code that defines the organization’s guiding values, supports ethically sound behavior, and emphasizes shared accountability.

Whistleblower

An insider who reports illegal or unethical conduct; protected by laws; whistleblowers may receive protections or rewards for disclosure.

Sarbanes-Oxley Act (SOX)

U.S. law that strengthens financial reporting and protects whistleblowers by allowing confidential reporting and requiring protection against retaliation.

Dodd-Frank Wall Street Reform and Consumer Protection Act

2010 law with a whistleblower bounty (10–30% of penalties over $1 million) and protections for those reporting misconduct.

Top management support for a code of conduct

Leadership must adopt and unconditionally back an explicit corporate code to set the ethical tone.

Ethical expectations start at the top

Employees must understand that the highest standards come from senior management’s example and expectations.

Training on ethical implications

Managers and staff are trained to consider the ethical consequences of all business decisions.

Ethics office and whistleblower protection

An office for ethics issues and a system that protects anonymous whistleblowers from retaliation.

External communication of the ethics program

Outside suppliers, subcontractors, distributors, and customers must be informed about the company’s ethics program.

Enforcement of the ethics code

The code must be enforced promptly and consistently; lax enforcement undermines ethics programs.

Ethics officer

A person who sets a positive tone, communicates effectively, investigates impartially, and maintains confidentiality.

Compliance-based vs. Integrity-based ethics codes (comparison)

Compliance-based focuses on obeying laws; integrity-based focuses on guiding values and shared accountability.

Corporate social responsibility (CSR)

A business’s concern for the welfare of society, beyond profit, grounded in integrity, fairness, and respect.

Corporate philanthropy

Charitable donations to nonprofit organizations as part of CSR.

Corporate social initiatives

Philanthropy closely tied to a company’s competencies and operations, aimed at social impact.

Corporate responsibility

Scope of CSR including fair treatment of employees and safe, responsible products and practices.

Responsibility to Customers

Rights of customers (safety, information, choice, to be heard); honesty and value in dealings with customers.

Responsibility to Investors

Ethical behavior adds to long-term value; avoidance of insider trading and fair disclosure (Regulation FD).

Responsibility to Employees

Creating jobs with fair pay and good benefits; supporting upward mobility and respectful treatment.

Responsibility to Society and Environment

Environmental stewardship and social contributions; balancing profits with public good.

Carbon footprint

Total amount of carbon dioxide emissions associated with a product or activity across its lifecycle.

Social auditing

Systematic evaluation of an organization’s progress toward socially responsible programs.

ISO 26000

International guidance standard on social responsibility (not a certifiable standard).

Regulation FD

Requires that if information is disclosed to one group, the same information must be shared with all investors.

Insider trading

Using private, material information for personal gain; illegal and regulated by the SEC.

Socially Responsible Investing (SRI)

Investing in companies based on CSR performance; growing market of funds and portfolios.

Three ethical decision questions

Is it legal? Is it balanced? How will it make me feel about myself?

Golden Rule

Do unto others as you would have them do unto you; a common basis for ethical behavior.

Foreign Corrupt Practices Act (FCPA)

U.S. law criminalizing bribery of foreign officials to obtain or retain business; promotes ethical global conduct.