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This guide covers Business Ethics and Corporate Social Responsibility.
Business Ethics
Refers to business philosophy and conduct, particularly regarding controversial issues that may present a moral or ethical dilemma.
Corporate Social Responsibility
Implies a corporation's commitment to play a beneficial role in the environments, economies, and the societies in which they have an impact.
Corporate governance
Deals with structures and practices in place to assure operating managers act in the best interest of shareholders. Typically, a board of directors, elected by shareholders, review and advise operating managers. The study of corporate governance looks at the expertise, diversity, and potential bias of corporate board members, as well as the ability of shareholders to influence policy and action.
Corporate philanthropy
Charitable contributions or funds and resources such as the use of corporate facilities or volunteer time by a firm's employees. A corporation may give funds directly or through a foundation created by the firm.
Environmental, Social, & Governance (ESG)
Framework used to evaluate how a company performs in these three areas. ESG criteria are often used by investors to screen potential investments, aiming to invest in companies that are not only profitable but also responsible and sustainable.
Ethical sourcing
Ensuring that products are obtained in a responsible and sustainable way, that workers involved in making them are safe and treated fairly, and that environmental and social impacts are considered.
Foreign Corrupt Practices Act of 1977
Prohibits U.S. citizens, corporations, and their employees from bribing foreign government officials. Later amendments prohibit foreign firms and persons from engaging in corrupt payments within the US.
Impact Investing
Investing in companies with high ESG scores and excluding investments in companies engaged in undesirable practices.
Insider trading
Trading of securities, such as stocks, based on nonpublic information.
Sarbanes-Oxley Act
Referred to as the US Senate "Public Company Accounting Reform and Investor Protection Act" and the US House "Corporate and Auditing Accountability, Responsibility, and Transparency Act." This legislation expanded requirements on US public company boards, management, and accounting firms in the wake of major accounting scandals such as at Enron and WorldCom.
Socially responsible investing (SRI)
Adding social, ethical, and/or environmental criteria in the selection of investments.
Stakeholder Theory
Maintains that customers, suppliers, employees, investors, communities, and others have a stake in organizations. This is in contrast to the view that businesses should only take account in the interest of shareholders
Triple Bottom Line
An accounting framework that takes into account social, environmental (or ecological), and financial performance.
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