The Institutionalization of

Business Ethics
Nicholas Gerry/3303019029
 The Institutional of Business Ethics
• The institutionalization of ethics is an important task for today’s
organizations if they are to effectively counteract the increasingly frequent
occurrences of blatantly unethical and often illegal behavior within large
and often highly respected organizations.

• Institutionalization in business ethics relates to established laws, customs

and expected organizational programs that are considered normative in
establishing reputation

• Institutions provide requirements, structure and societal expectations to

reward and sanction ethical decision making.
Three dimensions to effective business ethics compliance
• Voluntary Practices : A management-initiated boundary of conduct (the
beliefs, values, and voluntary contractual obligations)
All businesses have some voluntary commitments (e.g., philanthropy)
• Mandated boundaries : Externally imposed boundaries of conduct (e.g.,
laws and regulations)
• Core Practices : A highly appropriate and common practice that helps
ensure compliance with legal and requirements, industry self-regulation,
and social expectations. Often encouraged by legal and regulatory forces.
 Legal Compliance
• Law and regulations established by governments to set minimum standard
for responsible behavior

• Laws regulating business passed because stakeholders believe business

cannot be trusted to do what is right.
Elements of an Ethical Culture

Voluntary Actions,
Governance,
Core Practices,
Long Compliance

Values, Norms,
Artifacts, Behavior

Culture
 Types of Laws
• Civil law defines the rights and duties of individuals and organizations
• Criminal law prohibits specific actions and imposes punishment for
breaking the law
• The difference is enforcement
Criminal laws enforced by the state or nation
Civil Laws enforced by individuals (generally in court)
 Most Laws Affecting Business fall into 5 categories
• Regulating competition
• Protecting consumers
• Protecting equity and safety
• Protecting the environment
• Those that encourage ethical conduct
 Laws Regulating Competition
• Laws passed to prevent the establishment of monopolies,
inequitable pricing practices, and other practices that reduce or
restrict competitions among businesses,
Sometimes called procompetitive legislation : enacted to encourage
competition and prevent activities that restrain trade.
 Laws Protecting Consumers
• Laws protecting customers require businesses to provide
accurate information about products and services and to follow
safety standards
• Groups with specific vulnerabilities have higher levels of legal
protection
• The FTC’s Bureau of Consumer Protection protects consumers
against unfair, deceptive, or fraudulent practices
 Law Promoting Equity and Safety
• Laws promoting equity in the workplace protect the rights of minorities,
women, older persons, and persons with disabilities
–Equal Employment Opportunity Commission (EEOC)
–Affirmative action programs
–The Equal Pay Act
• Occupational Safety and Health Administration (OSHA) makes regular
inspections to ensure that employees have a safe working environment
–Many still work in unsafe environments
 Laws Protecting the environment
• Largely in response to stakeholder concerns about businesses’ impact on
environment
• Sustainability has become an important concept to businesses lately.
–Means “meeting the present needs without compromising future
generations’ abilities to meet their own needs”
–Being a green company can boost profits

• The Environmental Protection Agency (EPA) created in 1970 to coordinate

environmental agencies
 Philanthropic issues
• Involve business’s contribution to the local community and society
• Quality of life issues
–Responsible production of goods and services
–Technology improvements yet not damaging to the environment or harming
personal privacy
• Philanthropic issues
–Making the local community a better place to live
• Strategic philanthropy: Synergistic and mutually beneficial use of a
company’s core competencies and resources to deal with social issues
 Different Ethical Standards of various societies
• Any person in business government a university or some other
organizations are aware that ethical as well as legal standards do differ
particularly among nations and societies. For example, certain nations with
privately owned companies permit corporations to make contribution to
political parties, campaign and candidates
 Code of ethics
• A code is a statement of policies, principles, or rules that
guide behavior. Certainly, codes of ethics do not apply only to
business enterprises; they should guide the behavior of
persons in all organizations and in everyday life.

• Simply, stating a code of ethics is not enough and the

appointment of an ethics committee, consisting of internal
and external directors, is considered essential for
institutionalizing ethical behavior.
 Institutional of business ethics
Business ethics are increasingly addressed in seminars and conferences.
Managers, especially top managers do have a responsibility to create an
organizational environment that fosters ethical decision making by
institutionalizing ethics. This means applying and integrating ethical concepts
with daily actions. Can be accomplished in 3 ways:
• Establishing an appropriate company policy or a code of ethics
• Using a formally appointed ethics, committee
• Teaching ethics in management development programms.
 Institutional of business ethics in Companies
The publication of a code of ethics is not enough. Some companies require
employees to sign the code and include ethics criteria in the performance
appraisal. Moreover, certain firms connect compensation, and rewards to
ethical behavior.

Managers should also take any opportunities to encourage ethical behavior

and publicize it. On the other hand, employees should be encouraged to
report unethical practices. Most important, managers must be a good
example through ethical behavior and practices