Ghillyer Textbook Exam Study

MGT 444, chapter 1-10 main terms

Society

a structured community of people bound together by similar traditions and customs

Moral standards

principles by which judgments are made about good and bad behavior and are based on:

Religious belief

Cultural beliefs

Culture

a particular set of attitudes, beliefs, and practices that characterize a group of individuals

Value system

set of personal principles formalized into a code of behavior

Intrinsic values

quality by which a value is a good thing in itself

(Pursued for its own sake, whether anything comes from that pursuit or not)

Instrumental values

Quality by which the pursuit of one value is a good way to reach another value

Virtue ethics

concepts of living one's life according to a commitment to the achievement of a clear ideal

Utilitarianism

ethical choices that offer the greatest good for the greatest number of people

Universal ethics

actions that are taken out of duty and obligation to a purely moral ideal rather than based on the needs of the situation

(Universal principles are seen to apply to everyone, everywhere, all the time)

Ethical Relativism

Concept that the traditions of one's society, one's personal opinions, and the circumstances of the present moment define one's ethical principles

Business Ethics

Application of ethical standards to business behavior

1. Descriptive

2. Normative

Descriptive (Business Ethics)

Documentation of what is happening

Normative (Business Ethics)

Recommendation of what should happen

Stakeholder

someone with a share or interest in a business enterprise

Corporate governance

system by which business corporations are directed and controlled

Code of ethics

company's written standards of ethical behavior that are designed to guide managers and employees in making the decisions and choices they face every day

1977 Foreign Corrupt Practices Act (FCPA)

Ethical Climate: Major scandals draw attention to unethical conduct. Nixon's Watergate led to questions about ethics in government. Greater corporate awareness of public image. Recession exacerbates unemployment and labor issues.

"is a U.S. federal law that prohibits U.S. citizens, companies, and foreign entities connected to the U.S. from bribing foreign government officials to gain or retain business."

• anti-bribery provisions 

Ethical dilemma

a situation in which there is no obvious right or wrong decision, but rather a right or right answer.

Organizational culture

values, beliefs, and norms that all the employees of an organization share

Value chain

key functional inputs that an organization provides in the transformation of raw materials into a deliverable product or service.

Universal Ethics

Actions that are taken out of duty and obligation to a purely moral ideal rather than based on the needs of the situation

Accounting function

keeps track of all financial transactions

Auditing function

certification of an organization's financial statements as being accurate by an impartial third-party professional

Conflicts of Interest

Situations where one relationship or obligation places one in direct conflict with an existing relationship or obligation.

Corporate Social Responsibility (CSR)

Actions of an organization that are targeted toward achieving a social benefit over and above maximizing profits for its shareholders and meeting all its legal obligations

Also known as corporate citizenship and corporate conscience

Approaches:

• Instrumental

• Social Contract

Instrumental Approach to CSR

The perspective that the only obligation of a corporation is to maximize profits for its shareholders in providing goods and services that meet the needs of its customers

Social contract Approach to CSR

The perspective that a corporation has an obligation to society over and above the expectation of its shareholders

Driving Forces behind CSR

Transparency, Knowledge, Sustainability, Globalization, & Failure of the public sector

Ethical CSR

Organizations pursue a defined sense of social conscience in managing their:

• Financial responsibilities to shareholders

• Legal responsibilities to their local community and society as a whole

• Ethical responsibilities to do the right thing for all their stakeholders

Altruistic CSR

• Philanthropic approach to CSR

• Organizations underwrite specific initiatives to give back to the company's local community or to designated national or international programs

Strategic CSR

• Philanthropic approach to CSR

• Organizations target programs that will generate the most positive publicity or goodwill for the organization

(Programs run the greatest risk of being perceived as self-serving behavior on the part of the organization)

Corporate Governance

A system by which business corporations are directed and controlled

Good corporate governance:

plays a vital role in underpinning the integrity and efficiency of financial markets

Poor corporate governance:

weakens a company's potential and can lead to financial difficulties and fraud

Owners (in corporate governance)

supply equity or risk capital to the company by purchasing shares in the corporation

Board of directors (in corporate governance)

group of individuals who oversee governance of an organization

Audit committees

are responsible for monitoring the financial polices and procedures of the organization

Compensation committees

are responsible for setting the compensation for the chief executive officer (CEO) and other senior executives

King One

report was recognized as advocating the highest standards for corporate governance

• Took a more integrated approach to the topic of corporate governance

• By recognizing the involvement of all corporation's stakeholders in the efficient and appropriate operation of the organization

King Two Report

Formally recognized the need to:

• Move the stakeholder model forward

• Consider a triple bottom line as opposed to the traditional single bottom line of profitability

• Triple Bottom Line recognizes the economic, environmental, and social aspects of a company's activities

Comply or explain (Governance Methodologies)

Guidelines that require companies to abide by a set of operating standards or explain why they choose not to

Comply or else (Governance Methodologies)

Guidelines that require companies to abide by a set of operating standards or face stiff financial penalties

The Foreign Corrupt Practices Act (FCPA)

• Legislation introduced to control bribery and other less obvious forms of payment to foreign officials and politicians by American publicly traded companies

• Prior to the passing of the law, the illegality of paying bribes was punishable only through secondary sources of legislation.

• Encompasses all secondary measures that were currently in use to prohibit such behavior by forcing on: Disclosure & Prohibition

Disclosure

FCPA Requirement that corporations fully disclose any and all transactions conducted with foreign officials and politicians.

Prohibition

FCPA inclusion of wording from the Bank Secrecy Act and the Mail Fraud Act to prevent the movement of funds overseas for the express purpose of conducting a fraudulent scheme.

Facilitation payments

Payments that are acceptable (legal) provided they expedite or secure the performance of a routine governmental action.

Routine governmental action

Any regular administrative process or procedure, excluding any action taken by a foreign official in the decision to award new or continuing business

The U.S. Federal Sentencing Guidelines For Organizations (FSGO) 1991

• hold businesses liable for the criminal acts of their employees and agents.

• Requires that organizations police themselves by preventing and detecting the criminal activity of their employees and agents

Culpability score

Calculation of a degree of blame or guilt that is used as a multiplier of up to four times the base fine.

Sarbanes-Oxley Act (2002)

Legislative response to the corporate accounting scandals of the early 2000s that covers the financial management of businesses

• Created because of the crimes of the Nron company (they were doing illegal record-keeping things)

The Dodd-Frank Wall Street Reform and Consumer Protection Act

• Legislation that was promoted as the fix for the extreme mismanagement of risk in the financial sector that led to a global financial crisis in 2008 to 2010.

• Primary achievements.

• Consumer Financial Protection Bureau (CFPB)

• Financial Stability Oversight Council (F S O C)

• Volcker rule

Consumer Financial Protection Bureau (CFPB)

Government agency within the Federal Reserve that oversees financial products and services.

Financial Stability Oversight Council (FSOC)

Government agency established to prevent banks from failing and otherwise threatening the stability of the U.S. economy.

Volcker rule

Limits the ability of banks to trade on their own accounts in any way that might threaten the financial stability of the institution.

Whistle-Blowing

Employee who discovers corporate misconduct and chooses to bring it to the attention of others

Internal Whistle-Blowing

Employee discovering corporate misconduct and bringing it to the attention of his or her supervisor.

External Whistle-Blowing

Employee discovering corporate misconduct and choosing to bring it to the attention of law enforcement agencies and/or the media.

Civil False Claims Act

Whistle-blowers who expose fraudulent behavior against the government are entitled to between 10 and 30 percent of the amount recovered.

• Strengthened to make it easier and safer for whistle-blowers to come forward.

Qui Tam lawsuits

Brought on behalf of the federal government by a whistle-blower under the False Claims Act of 1863.

The Whistleblower Protection Act of 1989

• Addressed the issue of retaliation against federal employees.

• Imposed specific performance deadlines in processing whistle-blower complaints.

• Guaranteed anonymity of the whistle-blower.

• Required prompt payment of any portion of the settlement entitled to the whistle-blower.

Sarbanes-Oxley Act of 2002 (Blowing the Whistle)

Takes an integrated approach to whistle-blowing by:

• Prohibiting retaliation against whistle blowers

• Encouraging the act of whistle blowing itself

Dodd-Frank Wall Street Reform and Protection Act (Blowing the Whistle)

• Introduced a new reward program for whistle-blowers who report securities law violations to:

  • Securities and Exchange COmmission (SEC)

  • Commodity Futures Trading Commission (CFTC),

• Legislation stipulates that if more than $1 million is collected, he whistle-blower is entitled to:

  • Between 10% and 30% of collected amount

  • Clear entitlement to job and confidentiality protection,

Whistle-blower hotline

Telephone line by which employees can leave messages to alert a company of suspected misconduct without revealing their identity.

Intranet

Company's internal website, containing information for employee access only.

Extranet

private piece of a company's Internet network that is made available to customers and/or vendor partners on the basis of secured access by unique password.

Telecommuting

Ability to work outside office and log in to the company network.

• Technological advancement has made this concept a reality.

Thin consent (Employee Consent)

consent in which employee has little choice

Thick consent (Employee Consent)

Cosent in which employee has an alternative to unacceptable monitoring

Cyberliability

Employers can be held liable for the actions of their employees' Internet communications and activities.

Less-developed nation

Lacks the economic, social, and technological infrastructure of a developed nation

Developed nation

Enjoys a high standard of living as measured by economic, social, and technological criteria.

Globalization

Expansion of international trade to a point where national markets have been overtaken by regional trade blocs.

Multinational Corporation (MNC)

Company that provides and sells products and services across multiple national borders.

Advantages of globalization

• Bringing unprecedented improvements in the wealth and the standards of living of citizens in developing nations.

• Access to resources enables lower production costs that equate to lower prices and higher income standards for businesses of economically advanced nations

Disadvantages of globalization

• Developing countries are destroyed for their raw materials with no concern for the longer-term economic viability of their national economies.

• Workers are exploited

• Corporations are free to take full advantage of less restrictive legal environments

Sustainable Ethics

Ethical behavior that persists long after the latest public scandal or the latest management buzzword.

• Requires the involvement of every member of the organization

Ethics Officer

Senior executive responsible for monitoring the ethical performance of the organization both internally and externally.

Reactive policies

Result when organizations are driven by events and/or a fear of future events.

(Becoming a Transparent Organization)

Proactive policies

Result when the company develops a clear sense of what it stands for as an ethical organization.

(Becoming a Transparent Organization)

Transparency

Organization maintains open and honest communications with all stakeholders.