History of the Sarbanes-Oxley Act
Passed in 2002. Was the most far-reaching change in organizational control and accounting regulations since the Securities and Exchange Act of 1934.
Business Ethics
Comprises the principles, values, and standards that guide behavior in the world of business.
FSGO
Set guidelines based on 6 principles, broke new ground by codifying law incentives to reward organizations for taking action to prevent misconduct, such as developing effective internal legal and ethical compliance programs.
Principles
Specific and pervasive boundaries for behavior that are universal and absolute. These become the bases for rules.
Carrot-and-Stick
Companies that act to prevent misconduct receive a "carrot" and avoid penalties should a violation occur. The "stick" is the possibility of being fined or put on probation if convicted of a crime.
What are the three universal values of ethics?
1. Honesty
2. Integrity
3. Fairness
Centralized
In this organization, decision-making authority is concentrated in the hands of top-level managers, and little authority is delegated to lower levels.
Decentralized (the current trend)
In this organization, decision-making authority is delegated as far down the chain of command as possible. Typically have few formal rules, and coordination and control are usually informal and personal.
Ethics Audit
Evaluation of an organization's ethics program and performance to determine whether it is effective. Public reports are not required.
Social Audit
The process of assessing and reporting on a business's performance in fulfilling the economic, legal, ethical, and philanthropic responsibilities expected of it by its stakeholders.
Sarbanes-Oxley Act
Made securities fraud a criminal offense and stiffened penalties for corporate fraud. Created an accounting oversight bord that requires corporations to establish codes of ethics for financial reporting and developed greater transparency.
Leadership
The ability or authority to guide and direct others toward achievement of a goal, has significant impact on ethical decision making because leaders have the power to motivate others and enforce the organizations norms and policies as well as their own vie
What are the 6 types of leaders?
1. Coercive Leader
2. Authoritative Leader
3. Affiliative Leader
4. Democratic Leader
5. Pacesetting Leader
6. Coaching Leader
Transactional Leaders
Attempt to create employee satisfaction through negotiating for desired behaviors or levels of performance.
Transformational Leaders
Strive to raise employee's level of commitment and to foster trust and motivation.
T/F: Both transactional and transformational leaders can positively influence the corporate culture.
TRUE.
What are SEVEN habits of strong leaders?
1. Strong personal character
2. Passion to do right
3. Proactive
4. Consider stakeholders' interest
5. Role models for organizations values
6. Transparant and actively involved
7. Competent managers
Power
The influence that leaders and managers have over the behavior and decisions of subordinates.
When does an individual have power over others
When his or her presence causes a person to behave differently.
What are the five power bases from which one person may influence another?
1. Reward
2. Coercive
3. Legitimate
4. Expert
5. Referent
Reward Power
Refers to a persons ability to influence the behavior of others by offering them something desirable.
What are some examples of reward power?
Money, status, or promotion
Coercive Power
Penalizes actions or behavior.
What does coercive power rely on?
A fear to change behavior
Legitimate Power
Stems from the belief that a certain person has the right to exert influence and that certain others have an obligation to accept it.
Expert Power
Derived from a person's knowledge. Someone credible with subordinates.
Referent Power
May exist when one person perceives that his or her goals or objectives are similar to another.
Apathetic Culture
Shows minimal concern for either people or performance. SELF-INTEREST ONLY.
Caring Culture
High concern for other people, but minimal concern for performance issues.
Exacting Culture
Little concern for people, but high concern for performance.
Integrative Culture
Combines a high concern for people with one for performance.
Compliance Culture
Organized around risk.
What kind of approach do compliance cultures use?
A legalistic approach to ethics
Values-Based Ethics Culture
Rely's on mission statements that define the firm and stakeholder relations
Differential Association
Refers to the idea that people learn ethical or unethical behavior while interacting with others who are part of their role-sets or who belong to other intimate personal groups.
Codes of Conduct
Formal statements that describe what an organization expects of its employees.
Code of Ethics
The most comprehensive jane consists of general statements, sometimes altruistic or inspirational, that serve as principles and as the basis for rules of conduct.
Statement of Values
Serves the general public and also addresses distinct groups such as stakeholders.
Ethics Officers
Responsible for oversight of ethics/compliance program
What does an effective ethics program employ?
A variety of resources to monitor ethical conduct and measure the program's effectiveness.
Corporate Culture
A set of values, norms, and artifacts, including ways of solving problems shared by organizational members.
What does compliance with Sarbanes-Oxley 404 require?
Culture change
Where does Corporate Culture get their values, beliefs, and customs from?
Upper management
Cultural Audit
An assessment of the organizations values.
Who conducts a cultural audit?
Outside consultants
Where do 46% of employees report misconduct?
Supervisors
What are the 5 things a strong ethics program includes?
1. Written code of conduct
2. Ethics officer to oversee the program
3. Care in the delegation of authority
4. Formal ethics training
5. Auditing, monitoring, enforcement and revision of program standards
What does misconduct in the workplace result to?
Low employee trust and high turnover
Compliance Orientation
Requires that employees identify with and commit to specified conduct
Values Orientation
Focuses more on abstract ideals, such as respect and responsibility
What are the top 5 challenges for CEO's?
1. Managing Growth
2. Employee Turnover
3. Customer Relationships
4. Social Media
5. Regulatory Issues