Final answer:
Corporate governance promotes ethical behavior through the oversight role of the board of directors, regular auditing, and the influence of informed outside investors. The implementation of ethical codes provides a clear framework for addressing the complex ethical issues arising from new technologies and ensures accountability and transparency in business operations.
Step-by-step explanation:
How Corporate Governance Can Foster Ethical Managerial Behaviors
Corporate governance is critical in fostering ethical decisions and behaviors among managers. Codes of ethics, crafted and implemented by various organizations, play a pivotal role in guiding the conduct of corporate members. The board of directors, acting as the first line of oversight, is elected by shareholders to ensure top executives adhere to ethical and responsible practices. Regular reviews by an auditing firm also serve to maintain trust and transparency in financial reporting. Additionally, outside investors, like those holding large mutual funds or pension funds, exert influence by upholding expectations of ethical behavior. When these institutions, like in the case of Lehman Brothers, fail to function properly, it underscores the need for rigorous corporate governance to prevent misinformation and promote accountability.
Addressing ethical concerns in business extends beyond internal company practices to consider the moral obligations companies have towards their employees, shareholders, and society at large. The development of ethical frameworks is especially pertinent in light of emerging technologies, such as artificial intelligence, where the complexity and unpredictability of outcomes demand vigilant ethical scrutiny. In conclusion, effective corporate governance supports ethical practices by establishing responsibilities, mandating compliance with ethical codes, and engaging stakeholders in the accountability process.