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CHAPTER QUESTION 5: EXPLAIN THE FEDERAL SENTENCING GUIDELINES?
In 1991, President George H. W. Bush issued new Federal Sentencing Guidelines with the
intention of encouraging, though not requiring, managers to implement policies and procedures
that reinforce ethical behaviors.
Discussions about the need for guidelines were initiated during Jimmy Carter’s
presidential administration and further developed during the Reagan presidency.
The sentencing guidelines are based on the best practices for Ethics Compliance
Programs which, if implemented, could reduce the occurrence of unethical and criminal
activity.
The Federal Sentencing Guidelines are applicable to nonprofits, unions, partnerships,
trusts, and universities as well as businesses.
BEST PRACTICES
The 16 best practices suggested by the Federal Sentencing Guidelines, divided into 6
categories:
Organizational Personnel Issue
oSubstantial authority is not given to any employee known to have engaged in
illegal activities
Compliance/Ethics Program Personnel
oA specific high-level manager oversees the program
oA specific individual is accountable for the program’s day-to-day operations
Content of the Compliance/Ethics Program
oCode of Ethics
oProcedures for preventing and detecting criminal misconduct or unethical
behavior
oMechanism for employees to anonymously or confidentially seek guidance on, or
report, criminal or unethical conduct without fear of retaliation
Management of the Compliance/Ethics Program
oProgram training for all employees
oProgram content is communicated throughout the organization
oCriminal risks common to the profession or industry are periodically assessed
oPeriodically assess the program’s effectiveness
Rewards and Punishments
oEmployees are provided incentives for performing in accordance with the
program’s provisions
oIncentives for ethical behavior and legal compliance are consistently enforced
oEmployees violating the program’s provisions, or who fail to take reasonable
steps to prevent or detect criminal activity, are disciplined
oDisciplinary measures for unethical behavior or criminal misconduct are
consistently enforced
After Criminal Conduct Detected
oReasonable steps are taken to respond appropriately to the criminal conduct
oReasonable steps are taken to prevent similar criminal misconduct in the future
CULPABILITY FINE
The judge refers to a standardized chart listing fines for specific types of crime and
organizational size, and then adjusts the fine by a culpability multiplier
If an organization has not implemented any of the best practices, the fine can be assessed
a culpability multiplier of 4.0.
If the organization has exhibited a good faith effort by implementing the best practices, if
the fine can be assessed a multiplier of 0.05.
If some, but not all, of the best practices have been implemented, the fine will be between
these two amounts.
DISCUSSION ACTIVITY
Have each student assess his or her current or former place of employment using the Federal
Sentencing Guidelines Exhibit 2.5. In the last column, mark each best practice the organization
has and total the amount. Based on this analysis, what is the organization’s strengths and
weaknesses? If the student was the judge, what culpability score between 4.0 and 0.05 should the
judge assign?
ADDITIONAL QUESTION 2: WHAT IS A B CORPORATION?
In 2007, B Lab, a nonprofit organization, initiated a third-party Benefit Corporation (B
Corporation) certification process for branding a business as being ethical, sustainable, and
socially responsible.
They envision the IRS eventually creating a class of tax benefits for B Corporations, such
as taxing them at a 20 percent rate, which is between that of C Corporations (taxed at 40
percent) and nonprofits (not taxed).
DISCUSSION ACTIVITY
Should the federal government provide a special lower tax rate for companies that meet B
Corporation criteria for implementing best practices in business social performance? Why?
ADDITIONAL QUESTION 3: WHAT IS THE OPTIMAL SYSTEMS MODEL?
The Optimal Ethics Systems Model presented in Exhibit 2.7, synthesizes these various
approaches into a systematic “best practices” framework for reinforcing ethical behaviors, and
reducing ethical risks, throughout the workplace.
Creating and sustaining a culture of trust can be achieved through the multiple support systems
in the Optimal Ethics Systems Model.
Use the TIPS AND TECHNIQUES “The Total Quality Management of Ethics” format to
describe what to do after dismissing an employee for embezzlement.
Begin with “2a” – how did the person get through the hiring process?
End with making a manager more accountable for overseeing embezzlement issues
DISCUSSION ACTIVITY
Do the TIPS AND TECHNIQUES “The Total Quality Management of Ethics” format to describe
what to do after dismissing an employee for embezzlement.
* Begin with “2a” – review how the embezzler was hired
* Then “2b” – is issue addressed in the Code of Ethics or Conduct? Etc.
* End with an action plan to implement a policy to monitor more frequently for embezzlement
CHAPTER 2 CHAPTER AND ADDITIONAL QUESTIONS SUMMARY
Chapter Question 1: What are several salient business ethics issues in pre-capitalist
America?
Christopher Columbus is on a business mission to develop a new trade route to India
1580’s Queen Elizabeth I grants Walter Raleigh charter that becomes Roanoke settlement
1607 Jamestown settlement established for trade and search for gold and gems
1620 Pilgrims establish Plymouth settlement as trading post and work off transportation
and relocation debts as they seek religious freedom
Build up to the Revolutionary War
FOR DISCUSSION: Was there a peaceful way that Columbus and other European explorers
could have interacted with Native Americans, or was war inevitable since they wanted to settle
on the land and take resources?
FOR DISCUSSION: If you were an adviser to the British government in the mid-1700s, how
would you have managed the colonial complaints?
Chapter Question 2: How did Adam Smith justify the ethics of capitalism?
Adam Smith (1723-1790), a prominent member of the Scottish enlightenment,
applied the concepts “reason” and “liberty” to a wide range of endeavors, including
philosophy, politics, economics, and law.
FOR DICUSSION: Which of Smith’s four moral restraints – conscience, belief in God, reason,
or fear of jail – convinced you not to steal or cheat the last time you were tempted to?
FOR DISCUSSION: On a 1-6 scale, how ethical is the version of free market capitalism being
experienced right now.
Chapter Question 3: Describe how the U.S. economy grew between the Revolutionary War
and World War I.
In slightly more than a century, the United States economy grew from family farms and
general merchants offering a wide range of products into the world’s largest economy.
The Constitution provided patent rights to inventors
Sherman Antitrust Act of 1890 passed to prevent formation of anti-competitive
monopolies
Chartering laws changed in response to corporate growth, complexity, and political
power. Delaware became the most corporate-friendly state.
FOR DISCUSSION: What percentage of a market should (your personal belief) a company, such
as Microsoft or Coca-Cola, be allowed to control before it’s considered an anti-competitive
monopoly and be broken up?
Chapter Question 4: What prominent labor issues that challenged the fairness of free
market capitalism?
Working conditions terrible – child labor, work 5 a.m. to 7 p.m. every day, unhealthy
work conditions, low wages, severe fine system
In the Communist Manifesto, published in 1848, Karl Marx and Engels declared that the
workers of the world should unite against greedy capitalists and takeover ownership of
the means of production.
2009.
Income Inequality: Wealthiest 1% of the population possesses more wealth than the
bottom 90% combined.
Between 1976 and 2007, the share of total income going to the top 1 percent of earners
Minimum wage established 1938, never indexed to inflation, at $7.25 an hour (2011),
The ethical principle guiding the legislation was “a fair day’s pay for a fair day’s work.”
A “living wage” refers to the amount of money a full-time employee needs to either
afford the basic necessities in life or exceed the poverty threshold.
FOR DISCUSSION: Over the length of a career, what is the income difference between a high
school graduate and a college graduate?
FOR DISCUSSION: How much money must a single parent with child earn in your community
to afford the basic necessities of life?
FOR DISCUSSION: Should CEO pay be capped at a particularly income or ratio? If so, at what
amount or percent?
Additional Question 1: How have stakeholder rights been expanding since the 1960s?
Since the 1960s, profit maximization and the rights of owners came under attack by
social activists who believed business was a detriment, rather than a contributor, to
improving the quality of life.
FOR DISCUSSION: Do you believe we need more or less government regulation?
Chapter Question 5: Explain the Federal Sentencing Guidelines and how a judge would
apply them.
In 1991, President George H. W. Bush issued new Federal Sentencing Guidelines with
the intention of encouraging, though not requiring, managers to implement policies and
procedures that reinforce ethical behaviors.
FOR DISCUSSION: Assess your current or former organization using the Federal Sentencing
Guidelines. What culpability score would you apply based on the percentage of best practices
that are in place?
Additional Question 2: What is a B Corporation?
In 2007, B Lab, a nonprofit organization, initiated a third-party Benefit Corporation (B
Corporation) certification process for branding a business as being ethical, sustainable,
and socially responsible for having adopted many best practices in social performance.
FOR DISCUSSION: Should the federal government provide a special lower tax rate for
companies that implement best practices in business social performance? Why?
Additional Question 3: What is the Optimal Ethics Model?
The Optimal Ethics Systems Model presented in Exhibit 2.7, synthesizes these various
approaches into a systematic “best practices” framework for reinforcing ethical
behaviors, and reducing ethical risks, throughout the workplace.
FOR DISCUSSION: Use the TIPS AND TECHNIQUES “The Total Quality Management of
Ethics” format to describe what to do after dismissing an employee for embezzlement.
