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Last reviewed: July 1, 2022 to June 30, 2023
Next Review: 2024-2025


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.

Glossary - Concepts

Insider trading

 Trading of securities, such as stocks, based on nonpublic information.

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.

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. .

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

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.  See Freeman, RE and Reed, DL (1983) "Stockholders and Stakeholders: A New Perspective on Corporate Governance," California Management Review, v.25, Issue 3, p.88-106,  and book, Strategic Management: A Stakeholder Approach, 1984.

Triple Bottom Line

An accounting framework that takes into account social, environmental (or ecological), and financial performance.  This concept was introduced by Freer.

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) Investing

Investing in companies with high ESG scores relative to peers.

Impact Investing

Investing in companies with high ESG scores and excluding investments in companies engaged in undesirable practices.

Socially responsible investing (SRI)

Adding social, ethical, and/or environmental criteria in the selection of investments..

Reference Work(s)

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