Ethics Exam 2

FSGO penalties

monetary fines, organizational prohibition, and the implementation of an operational program to bring the organization into compliance with FSGO standards

Civil False Claims Act

"Lincoln's Law" whistle-blowers who expose fraudulent behavior against the government are entitled to between 10 and 30 percent of the amount recovered

the FCPA encompasses all the secondary measures that were currently in use to prohibit such behavior by focusing on two distinct areas:

Disclosure Prohibition

Sustainable ethics

ethical behavior that persists long after the latest public scandal or the latest management buzzword

facilitation payments

payments that are acceptable (legal) provided they expedite or secure the performance of a routine governmental action

reactive ethical policies

policies that result when organizations are driven by events and/or a few of future events

Coca-cola in China

rendered as ke-kou-ke-la which they did not discover until later meant "bite the wax tadpole" or "female horse stuffed with wax" depending on the dialect; Coke then researched 40,000 characters and found the equivalent of ko-kou-ko-le which was translated to "happiness in the mouth"

TITLE V: Analyst Conflicts of Interest

requires SEC to address conflicts of interest in research reports

culpability score

simply a multiplier with a maximum of 4, so the worse case scenario would be a fine of four times the maximum base the score can be increased (or aggravated) or decreased (or mitigated) according to predetermined factors

important qualities of transparency include:

- a requirement that is being enforces on markets and companies through regulation - an enabler of better relationships with partners and customers (that is soon to be an expectation) - a greater opportunity to rework business processes to increase efficiency - a risk to confidential intellectual property

6 stages of making ethical behavior sustainable requires the involvement of every member of the organization in committing to a formal structure to support an ongoing process of monitoring and enforcement

1. Establish a code of ethics 2. Support the code of ethics with extensive training for every member of the organization 3. Hire an ethics officer 4. Celebrate and reward the ethical behavior demonstrated by your employees 5. Promote your organization's commitment to ethical behavior 6. Continue to monitor the behavior as you grow

in creating a Code of Ethics, consider the following advice

1. Find a champion - Unless a senior person - hopefully the CEO - is prepared to drive introduction of a business ethics policy, the changes of it being a useful tool are not high. 2. Get endorsement from the chairperson and the board - Corporate values and ethics are matters of governance. The board must be enthusiastic not only about having such a policy but also about receiving regular reports on its operation. 3. Find out what bothers people - Merely endorsing a standard of code or copying that of another will not suffice. It is important to find out on what topics employees require guidance. 4. Pick a well-tested model - Use a framework that addresses issues as they affect different constituents or stakeholders of the company. The usual ones are shareholders, employees, customers, suppliers, and local/national community. Some might even include competitors. 5. Produce a company code of conduct - This should be distributed in booklet form or via a company intranet. Existing policies, for example on giving and receiving gifts or the private use of company software, can be incorporated. Guidance on how the code works should also be included. 6. Try it out first - The code needs piloting - perhaps with a sample of employees drawn from all levels and different locations. An external party such as the Institute of Business Ethics will comment on drafts. 7. Issue the code and make it known - Publish and send the code to all employees, suppliers, and others. State publicly that eh company has a code and implementation program that covers the whole company. Put it on your website, and send it to joint venture and other partners. 8. Make it work - Practical examples of the code in action should be introduced into all company internal (and external) training programs as well as induction courses. Managers should sign off on the code regularly, and a review mechanism should be established. A code "master" needs to be appointed.

The Ethics and Compliance Officers Association documented the chief responsibilities of their members in a survey that follows

89% oversight of hotline/guideline/internal reporting 89% preparation and delivery of internal presentations 88% organization-wide communications 85% senior management and/or board briefings/communications 84% training design 83% assessing/reviewing vulnerabilities 83% assessing/reviewing success/failure of initiatives 79% overseeing investigations of wrongdoing 79% management of program documentation 77% direct handling of hotline/guideline/internal reporting 72% preparation and delivery of external presentations 68% establishing company policy and procedures 64% international program development 61% training delivery 56% international program implementation 52% conducting investigations of wrongdoing

Explain the issue of ethical relativism in a global environment

Ethical relativism can be driven by local circumstances. Ethical business practices in North American may often be enforced by laws that do not apply to other countries. In such situations, domestic corporations are often required to follow the standard operating procedures (SOPs) of the client country even if, in areas of social and political chaos, those SOPs amount to nothing more than a bureaucratic nightmare. In that scenario business ethics can often deteriorate into "whatever it takes" to get the deal done

Understand the ethical issues arising in global business

Managing the business ethics of a domestic corporation can be challenging enough. Once a company move onto the international or global stage, the different languages, cultures., and business practices force North American companies to decide which of their ethical principles are nonnegotiable and which are open to discussion in favor of the client country with which they are looking to do business

1970s Watergate

Marine commander Daniel Ellsberg leaked over 7,000 pages of confidential Pentagon documents on government misconduct in Vietnam conflict to the press , risking life imprisonment to do so

three women recognized in 2002 for whistle-blowing

Sherron Watkins Coleen Rowley Cynthia Cooper

Analyze the ramifications of the UN Global Compact

The UN Global Compact represents a voluntary commitment to corporate citizenships by the 2,000 companies that have elected to participate since the compact became operational in July 2000. Since it is not regulatory instrument (and, by definition, not enforceable with any form of penalties for failing to comply with standards of compact), it is, at best, a public endorsement of the focus on the environment, anticorruption, the welfare of workers around the world, and global human rights. The credibility of the entire initiative is dependent on the public accountability, transparency, and enlightened self-interest of the member organizations in making sure that their global business practices align with the key principles of the compact.

Explain the challenges in developing a global code of ethics

The idea of developing a general standard of business practice that can be applied equally to all countries over and above their local customs and social norms is seen as the best hope for stopping the dark side of global capitalism. Western corporations, it is argued, have the financial strength to make extensive capital investments in developing countries, taking the natural resources of those countries as their raw materials for manufacturing plants elsewhere in the world. Without legal enforcement of ethical business practices, those corporations can conduct business without concern for employee welfare and safety. A global code of conduct, to which all international businesses would subscribe, would, it is believed, put a stop to those practices. However, the finical strength of Western nations is seen as a threat to equal representation of the developing nations, and as a result, those developing nations hold onto their national identities and cultures, thereby precluding any agreement on a general standard of business practice.

Evaluate the concept of vicarious liability

Vicarious liability is a legal concept that means a party may be held responsible for injury or damage even when he or she was not actively involved in an incident. The implications of vicarious liability are that the party charged is responsible for the actions of his or her subordinates. In this case, the "party" would be the corporation , and the "subordinates" would be the employees of that corporation. However, companies have always been liable for the actions of their employees in the performance of their designated work responsibilities. What has changed is the notion of cyberliability, where an employee's internet activity (web surfing and emails) can be treated in the same manner as letter written on company letterhead. Therefore, anything inappropriate, offensive, unethical, or illegal that an employee does while "on the clock" can expose the company to various liability. On that basis, monitoring software is just allowing companies to do something they have always wanted to do but never had the capability until now.

explain the term whistle-blower, and distinguish between internal and external whistle-blowing

When an employee discovers evidence of corporate misconduct and chooses to bring that evidence to the attention of others, he or she becomes a whistle-blower. If that employee chooses to bring the evidence to the attention of executives within the organization through appropriate channels, that option is referred to as internal whistle-blowing. If, on the other hand, the employee chooses to go outside the organization and contact law enforcement officials or the media, that option is referred to as external whistle-blowing.

organizational integrity

a characteristic of publicly committing to the highest professional standards and sticking to that commitment

ethics officer

a senior executive responsible for monitoring the ethical performance of the organization both internally and externally

transparency

characteristic of an organization that maintains open and honest communications with all stakeholders

1963 Otto Otopeka US State Department

dismissed for giving classified documents on security risks to the chief counsel of the State Subcommittee of Internal Security

routine government action

facilitated payments are acceptable provided they secure performance of a routine government action like: - providing permits, licenses or other official documents to qualify a person to do business in a foreign country - processing governmental papers, such as visas and work orders - providing police protection, mail pickup, and delivery or scheduling inspections associated with contract performance or inspections related to transit of goods across the country - providing phone service, power, and water supply; loading and unloading cargo; or protecting perishable products or commodities from deterioration - performing actions of similar nature

FCPA critiques

lacks any real teeth because of its formal recognition of facilitation payments, which would otherwise be acknowledged as bribes, the FCPA finds these payments acceptable provided they expedite or secure performance of a routine governmental action

sarbanes-oxley act 2004

law in 2003, response to series of corporate accounting scandals that had begun to dominate the financial markets and mass media, the 11 sections related to specific corporate examples of wrongdoing

aggravating factors

- high-level personnel were involved in or tolerated the criminal activity - the organization willfully constructed justice - the organization had a prior history of similar misconduct - the current offense violated a judicial order, an injunction, or a condition of probation

TITLE II: Auditor Independence

1. prohibits specific "nonaudit" services of public accounting firms as violations of auditor independence 2. prohibits public accounting firms from providing audit services to any company whose senior senior officers were employees by that accounting firm within the pervious 12 months 3. requires senior auditors to rotate off an account every five years and junior auditors every seven years 4. requires the external auditor to report to the client's audit committee on specific topics 5. requires auditors to disclose all other written communications between management and themselves

SOX and whistleblower protection

Congress take an integrated approach to the matter of whistle-blowing by both prohibiting retaliation against whistle-blowers and encouraging the act of whistle-blowing itself

Colleen Rowley

FBI staff attorney who rose to public prominence in May 2002 when she made public a memo to Director Robert Mueller about the frustration and dismissive behavior she faced from the FBI when her Minneapolis, Minnesota, field office argued for the investigation of a suspected terrorist, Zacarias Moussaoui, who was later indicated as a co-conspirator in the Sept 11 attacks

OECD Guidelines

Guidelines that promote principles and standards of behavior in the following areas: human rights, information disclosure, anticorruption, taxation, labor relations, environment, competition, and consumer protection; a governmental initiative endorsed by 30 members of the Organization of Economic Cooperation and Development and 9 nonmembers (Argentina, Brazil, Chile, Estonia, Israel, Latvia, Lithuania, Romania, and Slovenia)

Global Compact 10 key Principles

Human Rights - 1. Businesses should support and respect the protection of internationally proclaimed human rights 2. Businesses should make sure they are not complicit in human rights abuses Labor Standards - 3. Businesses should uphold the freedom association and effective recognition of the right to collective bargaining 4. Businesses should uphold the elimination of all forms of forced and compulsory labor 5. Businesses should uphold the effective abolition of child labor 6. Businesses should uphold the elimination of discrimination in employment and occupation Environment - 7. Businesses should support a precautionary approach to environmental challenges 8. Businesses should undertake initiatives to promote greater environmental responsibility 9. Businesses should encourage the development and diffusion of environmentally friendly technologies Anticorruption - 10. Businesses should work against all forms of corruption, including extortion and bribery

analyze the possible risks involved in becoming a whistle-blower

The media attention given to whistle-blowers as guardians of corporate conscience adds a gloss to the act of whistle-blowing that is undeserved. Jeffery Wigand's decision cost him his marriage and career. The media attention can be intrusive and unceasing, with harmful effects on every member of your family. Potentially lucrative settlements may offer some compensation, but those settlements can often take years to materialize and may offer little consolation to family members who have been uprooted and moved cross-country to start new lives away from the media spotlight. We may analyze the actions of a whistle-blower as a personal choice, but ultimately that choice affects many people.

multinational corporations (MNCs)

a company that provides and sells products and services across multiple national borders. Also known as transnational corporations; some economists argue that there must be owners from more than one country; others argue there must be products or services in multiple countries

Globalization upside

bringing unprecedented improvements in the wealth and standards of living of citizens in developing nations as they leverage their natural resources or low costs of living to attract foreign investment; for advanced nations, access to resources enables lower production costs that equate to lower prices and higher income standards for their customers

thick consent

consent in which the employee has an alternative to unacceptable monitoring. For example, if jobs are plentiful and the employee would have no difficulty in finding another position, then the employee has a realistic alternative for avoiding an unacceptable policy

thin consent

consent in which the employee has little choice. for example, when an employee receives formal notification that the company will be monitoring all email and web activity - either at the time of hire or during employment - and it is made clear that in that notification that his or her continued employment with the company will be dependent on the employee's agreement to abide by that monitoring two options: agree to the monitoring or pursue other employment opportunities

TITLE VIII: Corporate and Criminal Fraud Accountability

criminal penalties for altering documents or defrauding shareholders, protected employees who provide evidence of fraud

TITLE IV: Enhanced Financial Disclosures

enhanced disclosures, including effectiveness of internal controls and procedures and off balance sheet transactions

Utilitarianism

ethical choices that offer the greatest good for the greatest number of people

TITLE VII: Studies and Reports

federal and regulatory bodies to conduct studies regarding consolidation of accounting firms, credit rating agencies, and certain roles of investment banks and financial advisers

ethical relativism

gray area in which you ethical principles are defined by the traditions of your society, your personal opinions, and the circumstances of the present moment

Dodd-Frank and whistleblower protection

introduced a new reward program for whistle-blowers who report securities law violations to the Securities and Exchange Commission or the Commodity Futures Trading Commission; if more than $1 M is collected, the whistle-blower is entitled to between and 10 and 30 percent of the monies collected, in addition to a clear entitlement to job and confidentiality protection

Dodd-Frank Wall Street Reform and Consumer Protection Act

legislation that was promoted as the "fix" for the extreme mismanagement of risk in the financial sector that led to the global financial crisis in 2008-2010; passed with no Republican support

globalization downside

merely promoting the dark side of capitalism onto the global stage - developing countries are ravaged of their raw materials with no concern for longer-term economic viability of their national economies; workers are exploited; corporations are free to take full advantage of less restrictive legal environments

FSGO Prohibition

status of prohibition can include the following requirements: - reporting the business's financial condition to the court on a periodic basis - remaining subject to unannounced examinations of all financial records by a designated prohibition officer and/or court-appointed experts - reporting progress in the implementation of a compliance program - being subject to unannounced examinations to confirm that the compliance program is in place and is working

The Volcker Rule

the original Volcker Rule sought to stop the trading of derivatives completely, but was scaled back to compromise that limited the ethically questionable practices of banks taking opposing positions to trades that they are simultaneously promoting to their clients; banks are banned from proprietary trading, but they can still hedge investments and take other steps to protect client positions in specific investments

Sheron Watkins

vice president of Enron Corp, who in the summer of 2001 wrote two key emails warning Enron Chairman Ken Lay that it was only a matter of time before the company's creative "accounting treatment" would be discovered and bring the entire organization down

unethical whistleblowing

when there is evidence that the employee is motivated by the opportunity for financial gain or media attention or that the employee is carrying out an individual vendetta against the company, then the legitimacy of the act of whistle-blowing must be questioned

Cynthia Cooper

whose internal auditing team first uncovered questionable accounting practices at WorldCom. Her team's initial estimates placed the discrepancy at $3.8B; the final balance was nearer to $11B

a well written code of ethics can:

- capture what the organization understands ethical behavior to mean - you values statement - establish a detailed guide to acceptable behavior - state policies for behavior in specific situations - document punishments for violations of those policies

celebrate and reward ethical behavior of employees by

- celebrate examples of good ethical behavior in your company newsletter - award prizes for ethical behavior - and let the employee choose the reward - award prizes for new and creative ideas - and let the employee choose the reward - recognize employees who represent the standard of behavior to which you are committing - declare an Ethics Day, and allow every department to share success stories

Critics argue that MNCs arguments:

- if they didn't pursue the business someone else would - they are operating in full compliance with local laws and regulations, which conveniently happen to be far less restrictive than those they would face in their own country

ethics of whistle-blowing

- invaluable service to organization to bring illegal actives to light to the media and potentially save the organization millions of dollars; brave people putting their careers on the line - actions motivated by egos of "loose cannons" and "troublemakers" who challenge the policies and practices of their employers while claiming to act as the corporate conscience; "sneaks," spies, or "squealers" who have in some way breached the trust and loyalty of their employers

Invasive tools to monitor employees at the workplace

- packet-sniffing software can intercept, analyze, and archive all communication on a network, include employee email, chat sessions, file sharing, and Internet browsing. employees who use the workplace network to access personal email accounts not provided by the company are not protected. their private accounts, as long as they are accessed on workplace network or phone lines, can be monitored - keystroke loggers can be employed to capture every key pressed on a computer board. these systems will even record information that is typed and then deleted - phone monitoring is pervasive in the American workplace. some companies employe systems that automatically monitor call content and breaks between receiving calls - video surveillance is widely deployed in the American workplace. in a number of cases, video surveillance has been used in employee bathrooms, rest areas, and changing areas. video surveillance, under federal law, is acceptable where the camera focuses on publicly accessible areas. however, installment in areas where employees or customers have legitimate expectation of privacy, such as inside bathroom stalls, can give the employee a cause of action under tort law - "smart" ID cards can track an employee's location while he or she moves throughout the workplace. by using location tracking, an employer can monitor whether employees spend enough time in front of the bathroom sink to wash their hands. new employee ID cards can even determine the direction the worker is facing at any given time

increased productivity - employer view

- productivity during your time at work represents the performance portion of the pay-for-performance contract you entered - other than lunch/break all of your activity should be work-related and any monitoring of that activity should not be regarded as infringement of your privacy - organization has an obligation to its stakeholders to operate as efficiently as possible, which includes monitoring in order to ensure there is no misuse

increased productivity - employee view

- recognize that the time at work represents the productivity to receive compensation - however that agreement should not intrude on rights as an individual - should be notified of any electronic surveillance and the purpose of that surveillance - actions of some employees breaking the company rules does not justify everyone's civil rights

team meetings to implement the COE can work on:

- recognizing the ethical issue - discussing options for an appropriate response - selecting the best option for the organization

Revised Federal Sentencing Guidelines for Organizations (2004) 3 key changes

- required companies to periodically evaluate the effectiveness of their compliance programs on the assumption of a substantial risk that any program is capable of failing. they also expect the results of these risk assessments to be incorporated back into the next version of the compliance program - required evidence of actively promoting ethical conduct rather than just complying with legal obligations. for the first time, the concept of an ethical culture was recognized as a foundational component of an effective compliance program - defund accountability more clearly. corporate officers are expected to be knowledgeable about all aspects of the compliance program, and they are required to receive formal training as it relates to their roles and responsibilities within the organization

why can these two views not reach a resolution?

- the availability of ongoing technological advancements has made it increasingly difficult to determine precisely where work ends and personal life begins - the willingness to negotiate or compromise has risen and fallen in direct relation to the prevailing job market

mitigating factors

- the organization had an effective program to prevent and detect violations of law - the organization self-reported the offense to appropriate governmental authorities, fully cooperated in the investigation, and accepted responsibility for criminal conduct

OECD first 5 Guidelines or Chapters

1. Concepts and Principles: Sets out the principles that underlie the guidelines, such as their voluntary character, their application worldwide, and the fact that they reflect good practice for all enterprises 2. General Policies: Contains the first specific recommendations, including provisions on human rights, sustainable development, supply chain responsibility, and local capacity building; and more generally, calls on enterprises to take full account of established policies in the countries which they operate 3. Disclosure: Recommends disclosure on all material matters regarding the enterprise such as its performance and ownership, and encourages communication in all areas where reporting standards are still emerging such as social, environmental, and risk reporting 4. Employment and Industrial Relations: addresses major aspects of corporate behavior in this area including child and forced labor, nondiscrimination and the right to bona fide employee representation, and constructive negotiations 5. Environment: Encourages enterprises to raise their performance in protecting the environment, including performance with respect to health and safety impacts. Features of this chapter include recommendations concerning environmental management systems and the desirability of precautions where there are threats of serious damage to the environment

2 areas of loss of privacy

1. Customers must be aware that companies now have the technical capability to send their personal data to any part of the world to take advantage of lower labor costs. 2. As a new employee, you must be aware that employers now have the capability of monitoring every email you send and website you visit in order to make sure that you really are delivering on the promise of increased worker productivity.

Richard DeGeorge guidelines for organizations doing business across national boundaries in the name of global commerce while respecting the individual customer of the countries in which they are operating

1. Do no intentional harm 2. Produce more good than harm for the host country 3. Contribute to the host country's development 4. Respect the human rights of their employees 5. Respect the local culture; work with it, not against it 6. Pay their fair share of taxes 7. Cooperated with the local government to develop and enforce just background institutions 8. Majority control of a firm includes the ethical responsibility of attending to the actions and failures of the firm 9. Multinationals that build hazardous plants are obliged to ensure that the plants are safe and operated safely 10. Multinationals are responsible for redesigning the transfer of hazardous technologies so that such technologies can be safely administered in host countries

Identify the five key pieces of U.S. legislation designed to discourage, if not prevent, illegal conduct with organizations

1. The Foreign Corrupt Practices Act (1977): The act was passed to more effectively control bribery payments to foreign officials and politicians by American publicly traded companies 2. The US Federal Sentencing Guidelines for Organizations (1991): FSGO applies to organizations and holds them liable for the criminal acts of their employees and agents 3. The Sarbanes-Oxley Act (2002): SOX was a legislative response to a series of corporate accounting scandals that had begun to dominate the financial markets in 2001 4. The Revised Federal Sentencing Guidelines for Organizations (2004): The revision modified of the 1991 guidelines by requiring periodic evaluation of the effectiveness of corporate compliance programs and evidence of active promotion of ethical conduct rather than passive compliance 5. The Dodd-Frank Wall Street Reform and Consumer Protection Act (2010): The act introduced a complex list of new rules and restrictions designed to provide greater regulatory oversight of the financial sector, along with improved protection for consumers

Mechanisms for employers to put in place for whistle-blowing

1. all well-defined process to document how such complaints are handled - a nominated contact person, clearly identified authority to respond to the complaints, firm assurance of confidentiality, and non-retaliation against the employee 2. an employee hotline to file such complaints, again with firm assurances of confidentiality and non-retaliation to the employee 3. a prompt and thorough investigation of all complaints 4. a detailed report of all investigations, documenting all corporate officers involved and all action taken

FSGO Seven Steps for an effective compliance program

1. management oversight - a high-level official must be in charge of and accountable for the compliance program 2. corporate policies - policies and procedures designed to reduce the likelihood of criminal conduct in the organization must be in place 3. communication of standards and procedures - ethics policies must be effectively communicated to every stakeholder of the organization 4. compliance with standards and procedures - evidence of active implementation of these policies must be provided through appropriate monitoring and reporting 5. delegation of substantial discretionary authority - no individuals should be granted excessive discretionary authority that would increase the risk of criminal conduct 6. consistent discipline - the organization must implement penalties for criminal conduct and for failing to address criminal misconduct in a consistent manner 7. response and corrective action - criminal offenses, whether actual or suspected, must generate an appropriate response, analysis, and corrective action

10 Commandments of Computer Ethics

1. thou shalt not use a computer to harm other people 2. thou shalt not interfere with other people's computer work 3. thou shalt not snoop around other people's computer files 4. thou shalt not use a computer to steal 5. thou shalt not use a computer to bear false witness 6. thou shalt not copy or use proprietary software for which you have not paid 7. thou shalt not use other people's computer resources without authorization or proper compensation 8. thou shalt not appropriate other people's intellectual output 9. thou shalt think about social consequences of the program you are writing or the system you are designing 10. thou shalt always use a computer in ways that ensure consideration and respect for fellow humans

5 conditions of ethical whistle-blowing

1. when a company, through a product or decision, will cause serious and considerable harm to the public or break laws, the employee should report the organization 2. when the employee identifies a serious threat of harm, he or she report it and state his or her moral concern 3. when the employee's immediate supervisor does not act, the employee should exhaust the internal procedures and chain of command to the board of directors 4. the employee must have documented evidence that is convincing to a reasonable, impartial observer that his or her view of the situation is accurate, and evidence that the firm's practice, product or policy seriously threatens and puts in danger the public or product user 5. the employee must have valid reasons to believe that revealing the wrongdoing to the public will result in the changes necessary to remedy the situation. the chance of succeeding must be equal to the risk and danger the employee takes to blow the whistle.

OCED second 5 guidelines or chapters

6. Combating Bribery: Covers both public and private bribery and addresses passive and active corruption 7. Consumer Interests: Recommends that enterprises, when dealing with fair businesses, marketing, and advertising practices; respect consumer privacy; and take all reasonable steps to ensure the safety and quality of goods or services provided 8. Science and Technology: Aims to promote the diffusion by multinational enterprises of the fruits of research and development activities among the countries where they operate , thereby contributing to the innovative capacities of host countries 9. Competition: Emphasizes the importance of an open and competitive business climate 10. Taxation: Calls on enterprises to respect both the letter and spirit of tax laws and to cooperate with tax authorities

Understand the difference between reactive and proactive ethical policies

A reactive ethical policy exists when organizational decisions are driven by events or the fear of future events. A proactive is established when the company develops a clear sense of what it stands for as an ethical organization and what actions will be taken (and what punishments will be enforced, if necessary) to get there.

illegal behaviors under FCPA

Bribes: payments of money or anything else of value to influence any foreign official to act in a manner that would be in violation of their lawful duty; payments, authorizations, promises, or offers to any other person if there is knowledge that any portion of the payment is to be passed along to a foreign official or foreign political party, official, or candidate for a prohibited purpose under the act (knowledge is defined very broadly and is present when one knows an event is certain or likely to occur) Record-keeping and accounting provisions: books, records, and accounts must be kept in reasonable detail to accurately and fairly reflect transactions and dispositions of assets; a system of internal accounting controls is devised to provide reasonable assurances that transactions are executed in accordance with management's authorization

Develop the key components of an ethics policy

For an organization to develop an ethical culture, and for that culture to be sustainable, an ethics policy requires the involvement of every member of the organization in committing to a formal structure to support an ongoing process of monitoring and enforcement. This can be achieved through six initiatives: 1. Establish a code of ethics that present common understanding of organizational values and provides clear guidance on acceptable behavior 2. Support the code of ethics with extensive training for every member of the organization 3. Hire and ethics officer to formalize the management and leadership of the organization's commitment to an ethical culture 4. Celebrate and reward ethical behavior so that employees come to see ethical behavior as a positive event rather than an avoidance of punishment 5. Promote your organization's commitment to ethical behavior so that all your stakeholders can learn what to expect from you 6. Continue to monitor the behavior as you grow so that ethical conduct remains ingrained in the organizational culture

Distinguish between thin and thick consent

In an economic climate of high unemployment, any formal notification of corporate monitoring of email and web activity, with a clear "take it or leave" message, represents thin consent, since the employees have limited options available to them if they object to the monitoring practices. If employees do have options available to them, such as when jobs are plentiful of their skills are highly marketable, then consent to the monitoring practices would be considered thick, since those employees would have realistic alternative if they found the practices unacceptable.

Analyze an organization's employee-surveillance capabilities

In chronological order of arrival in our work environment, phone monitoring has been employed for decades. Before the technology existed to record calls automatically, human beings (operators or supervisors) could be called upon to "listen in" to conversations. Video surveillance has slowly expanded from the secure protection to key access points to an office or factory to a more widespread monitoring of every area of the company's physical plant. The rapid advancement of computer technology (and the perceived increase in cyberliability) has led to the development of keystroke-logging software to capture every key pressed on a computer keyboard. Similarly, "packet-sniffing" software (named after the practice of breaking up blocks of information into packets for distribution over the Internet) can intercept, analyze, and store all communications on a network. The most recent advance has been the "smart" ID card that can track an employee's location while he or she moves through the workplace. In the same manner as GPS monitoring of delivery vehicles, the company now knows where you are at all times.

Discuss the challenges of a commitment to organizational integrity

Organizational integrity is very easy to commit to, but very difficult to enforce. Integrity involves winning the trust and confidence of all your stakeholders and working to keep that trust over the long term. In practice, that means understanding what the company does not operate independently from its communist, its customers, its employees, its stockholder,s and its suppliers. Any and all decisions should be made with those parameters in mind. As such, doing the right thing has a much broader reach than just doing the right thing for the company.

Analyze the ramifications of becoming a transparent organization

Organizational transparency represents a commitment to honest and open communication with all stakeholders, and can often be the hardest adjustment in any ethics policy. Trusting your employees enough to share your cost and revenue figures with them goes against most business school teachings. Similarly, presenting an honest picture of organizational performance in a detailed annual report can generate paranoia about proprietary information and the dangers of corporate espionage. However, carefully "wordsmithed" documents and carefully positioned press releases suggest you have something to hide, and if you have something to hide, how can you be trusted?

Explain the OECD Guidelines for Multinational Enterprises

Originally adopted as part of the larger Declaration on International Investments and Multinational Enterprises in 1976, the Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises represents a more governmental approach to the same issues featured in the UN's nongovernmental Global Compact. Supporters argue that the government backing adds credibility to the issues being promoted, but the guidelines carry no criminal or civil enforcement and are not regarded as legally binding. What they do offer are principles and standards of behavior that draw not the same core vales as the UN Global Compact across a broader series of issues captured in 10 "chapters."

Explain why the key provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act

Passed into law in July 2010, Dodd-Frank was promoted as the "fix" for the extreme mismanagement of risk in the financial sector that led to a global financial crisis in 2008-2010. At over 2,300 pages, the legislation presented a complex list of new rules and restrictions designed to provide greater regulatory oversight of the financial sector, along with improved protection for consumers. The three most actively promoted elements of Dodd-Frank were: - The Consumer Financial Protection Bureau (CFPB): Designed as an independently run entity in the Federal Reserve, the CFPB promises to act on any perceived misconduct by financial institutions in the treatment of their customers. - The Financial Stability Oversight Council (FSOC): Led by the Treasury secretary and a team of senior financial regulators, the FSOC is empowered to regulate any bank with assets over $50 billion if it determines that the business practices of a bank pose "a grave threat to the financial stability of the US." As the promised fix for "too big to fail," the FSOC has the power to intervene in any aspect of the bank's management up to and including the termination of business practices. - The Volcker Rule: Proposed by former Federal Reserve Chairman Paul Volcker, this rule limits the ability of banks to trade on their own accounts (i.e. invest their own money) in any way that might threaten the finical stability of the institution (and, by definition, the financial markets as a whole).

Calculate monetary fines under the three-step process of the US Federal Sentencing Guidelines for Organizations (FSGO)

Step 1: Calculate the "base fire" based on the greatest of the monetary gain to the organization from the offense, the monetary loss from the offense of caused by the organization, or an amount determined by the judge Step 2: Compute a corresponding degree of blame or guilt known as the "culpability score" that can be increased (or aggravated) or decreased (or mitigated) according to the predetermined factors Step 3: Multiply the base fine by the culpability score to arrive at the total fine amount. In certain cases the judge has the discretion to impose a so-called death penalty, where the fine is set high enough to match all the organization's assets

FSGO three step process

Step 1: Determination of the "Base Fine" - greatest of the monetary gain to the organization; the monetary loss from the offense caused by the organization to the extent the loss was caused knowingly, intentionally, or recklessly; the amount determined by the judge based on an FSGO table Step 2: The Culpability Score - multiplier with a maximum of 4, so the worst case scenario would be a fine of four times the maximum base fine based on these factors aggravating factors: high-level personnel involved or tolerated the criminal activity; the organization willfully obstructed justice; the organization had a prior history of similar misconduct; the current offense violated a judicial order, an injunction, or a condition of probation mitigating factors: the organization had an effective program to prevent and detect violations of law; the organization self-reported the offense to appropriate governmental authorities, fully cooperated in the investigation, and accepted responsibility for the criminal conduct Step 3: Determining the Total Fine Amount - base fine multiplied by the culpability score gives the total fine amount - death penalty - fine is set high enough to match all the organizations assets, this is warranted where the organization was operating primarily for criminal purpose

evaluate the ethical ramifications of recent technological advances

Technological advances often deliver new and improved functionality before we have the chance to fully consider the ethical ramifications of those improvements. Having a computer at every employee's workstation enables rapid communication, but it also allows employers to monitor every email sent and website visited. Consumers who register on a company's website often provide personal data with no clear understanding of what the company will do with that or how securely they will be stored

Evaluate the possible consequences of ignoring the concerns of a whistle-blower

The opportunity to address illegal or unethical activities before the situation is revealed in the media could potentially save an organization's corporate reputation, prevent a punitive fall in the company's stock price, and as we saw in Chapter 6, help minimize federal fines. Choosing to dismiss the concerns of a whistle-blower, as organizations seem to do with disheartening frequency, merely serves to escalate an already volatile situation and place the organization in even deeper hole when the situation is made public.

Understand the purpose and significance of the Foreign Corrupt Practices Act (FCPA)

The FCPA represented an attempt to send a clear message that the competitiveness of US corporations in overseas markets should be based on price and product quality rather than the extent to which companies had paid off foreign officials and political leaders. However, the legislation was criticized for lacking any real "teeth" because of its formal recognition of "facilitation payments" for "routine government action" such as the provision of permits, licenses, or visas. Critics argued that since the payment of bribes was typically designed to expedite the paperwork on most projects, the recognition of these facilitation payments did nothing more than legalize the payment of bribes.

Compare and Contrast the relative advantages and disadvantages of Sarbanes-Oxley Act (SOX)

The aim of SOX was to improve the accountability of managers to shareholders and to calm the raging crisis of confidence in American capitalism aroused by scandals at Enron, WorldCom, and other companies. The establishment of the PCAOB and the specific changes to auditor independence and corporate responsibility certainly helped achieve that aim. However, critics argue that the rush to restore confidence produced legislation that was too heavy-handed in its application. Smaller companies were directly affected by the additional auditing costs, even though the unethical behavior that SOX was designed to address had occurred in publicly traded companies. In addition, the legislation applied to all companies issuing securities under US federal securities statutes(whether headed in the US or not), which brought 1,300 foreign firms from 59 countries under the law's jurisdiction.

explain the opposing employer and employee views of privacy at work

The employer view begins with the premise that other than lunch and breaks, all your activity should be work-related. Any nonwork-related web surfing or personal emails represent a misuse of company property. Using monitoring software to track such activity is not infringement of privacy but a standard monitoring procedure of company property. In contrast, the employee view represents the intrusion of monitoring practices as a clear infringement of civil rights. with the constant connectivity of laptops and smartphones now blurring the line between work hours and home life, employees argue that greater flexibility is warranted. In addition, from a trust perspective, employees raise the question that if you feel the need to monitor them constantly, why did you hire them in the first place?

Understand the different motivations of a whistle-blower

Whistle-blowers are generally considered to be models of honor and integrity at a time when in the business world seems to be in very short supply. However, such actions can also be motivated by the desire for revenge, when an ex-employee feels maligned and tries to created trouble for her former employer. In addition, the potential for financial gain through the settlement of qui tam lawsuits can be seen to bring the true intent of the whistle-blower into question.

intranet

a company's internal website, containing information for employee access only

developed nation

a country that enjoys a high standard of living measured by economic, social, and technological criteria

less-developed nations

a country that lacks the economic, social, and technological infrastructure of a developed nation

Global Code of Conduct

a general standard of business practice that can be applied equally to all countries over and above their local customs and social norms

The Financial Stability Oversight Council

a government agency established to prevent banks from failing and otherwise threatening the stability of the US economy, empowered to act if a bank with more than $50 billion in assets poses grave threat to the stability of the US actions include the ability of the bank to merge with, acquire, or otherwise become affiliated with another company; restricting the ability to offer financial products or services; terminating one or more activities; imposing conditions on how the company conducts businesses; and selling or transferring assets to unaffiliated entities to mitigate any perceived risk

The Consumer Financial Protection Bureau (CFPB)

a government agency within the Federal Reserve that oversees financial products and services, separate financing and an independent director to minimize the potential for aggressive lobbying practices by financial services companies

Qui Tam Lawsuit

a lawsuit brought on behalf of the federal government by whistle-blower under the False Claims Act of 1863, to protect the government against fraudulent defense contractors, make it easier for whistle-blowers to come forward, establishes whistle blower as a deputized petitioner for the government

Cyberliability

a legal concept that employers can be held liable for actions of their employees in their Internet communications to the same degree as if those employers had written those communications on company letterhead

vicarious liability

a legal concept that means a party may be held responsible for injury or damage even when he or she was not actively involved in an incident; parties that may be charged with this are generally in a supervisory role over the person or parties personally responsible for the injury or damage

extranet

a private piece of a company's Internet network that is made available to customers and/or vendor partners on the basis of secured access by unique password

whistle-blower hotline

a telephone line by which employees can leave messages to alert a company of suspected misconduct without revealing their identity

UN Global Compact

a voluntary corporate citizenship initiative endorsing 10 key principles that focus on four key areas of concern: the environment, anticorruption, the welfare of workers around the world, and global human rights

Title XI: Corporate Fraud and Accountability

additional authority to regulatory bodies and courts to take various actions, including fines or imprisonment

TITLE VI: Commission Resources and Authority

additional funding and authority to SEC to follow through on all new responsibilities in this act

Whistleblower Protection Act of 1989

addressed the issue of retaliation against federal employees who bring accusations of unethical behavior. The act imposed specific performance deadlines in processing whistle-blower complaints and guaranteed the anonymity of the whistle-blower unless revealing the name would prevent criminal activity or protect the public safety. it also required prompt payment of any portion of the settlement to which the whistle-blower would be entitled, even if the case were still working its way through the appeals process. applied only to federal employees

internal whistle-blowing

an employee discovering corporate misconduct and bringing it to the attention of his or her supervisor, who then follows established procedures to address the misconduct within the organization

external whistle-blowing

an employee discovering corporate misconduct and choosing to bring it to the attention of law enforcement agencies and/or the media

whistle-blower

an employee who discovers corporate misconduct and chooses to bring it to the attention of others

TITLE I: Public Company Accounting Oversight Board

an independent oversight body was an attempt to reestablish the perceived independence of auditing companies, also maintaining compliance with established standards and enforcing rules and disciplinary procedures for those organizations that found themselves out of compliance

Title IX: White-Collar Crime Penalty Enhancements

any person who attempts to commit white-collar crime will be treated under the law as if the person had committed the crime, CEOs and CFOs certify periodic reports and imposes penalties for certifying a misleading or fraudulent report

Federal Sentencing Guidelines for Organizations (FSGO)

applies to organizations and holds them liable for the criminal acts of their employees and agents. it requires that organizations police themselves by preventing and detecting the criminal activity of their employees and agents. mission to promote ethical organizational behavior and increase the costs of unethical behavior, "no business enterprise is exempt." exhaustive list of covered business crimes that appears very easy to fall into.

TITLE III: Corporate Responsibility

audit committees to be independent, quarterly SEC reports, rules of conduct for companies and pension black out periods

TITLE X: Corporate Tax Returns

conveys sense of the senate that the CEO should sign a company's federal income tax return

Foreign Corrupt Practices Act (FCPA)

introduced to more effectively control bribery and other less obvious forms of payment to foreign officials and politicians by American publicly traded companies as they pursued international growth

Legal behaviors under FCPA

grease payments: payments to foreign officials in order to expedite or secure the performance of routine government action (obtaining permits, licenses, other official documents, expediting lawful custom clearances, obtaining the issuance of entry or exit visas, providing police protection, mail pickup and delivery, phone service, performing actions that are wholly unconnected to the award of new business or the continuation of prior business) marketing expenses: payments to foreign officials in connection with the promotion or demonstration of company products or services or in connection with the execution of particular contract with a foreign government payments lawful under foreign laws: payments may (very rarely) be made to foreign officials when the payment is "lawful under the written laws of the foreign country" political contributions: it may be occasionally appropriate for a US company's overseas operations to make a political contribution on behalf of the company. Contributions not only include checks to parties or candidates, but also payments for fund-raising dinners and similar events. This would be an example of payment that could violate the FCPA if it were not for written local law. donations to foreign charities: US companies may make donations to bona fide charitable organizations provided that the donation will not be used to circumvent the FCPA and the contribution does not violate local laws, rules or regulations

proactive ethical policies

policies that result when the company develops a clear sense of what is stands for as an ethical organization

telecommuting

the ability to work outside of your office (from your home or anywhere else) and log in to your company network (usually via a secure gateway such as virtual private network, VPN)

Prohibition

the act includes wording form the Bank Secrecy Act and Mail Fraud Act to prevent the movement of funds overseas for the express purpose of conducting a fraudulent scheme

Disclosure

the act requires corporations to fully disclose any and all transactions conducted with foreign officials and politicians, in line with the SEC provision

globalization

the expansion of international trade to a point where national markets have been overtaken by regional trade blocks (Latin America, Europe, Africa), leading eventually to a global marketplace

Recommend how to build internal policies to address the needs of whistle-blowers

the greatest fear of any whistle-blower is retaliation, both within the organization and within that employee's profession. Addressing that fear requires a guarantee of anonymity in coming forward with whatever evidence has been uncovered. For that guarantee to have any credibility, there must be trust between employees and their employer. Critics argue that expecting such trust to be present in an environment where illegal/unethical behavior is taking place is unrealistic. Nevertheless, the organization can encourage whistle-blowers to come forward with a series of clearly defined initiatives: - a well-defined process to document how such complaints are handled - a nominated contact person, clearly identified authority to respond to the complaints, firm assurances of confidentiality, and nonretaliation against the employee - an employee hotline to file such complaints, again with firm assurances of confidentiality and nonretaliation to the employee - a prompt and thorough investigation of all complaints - a detailed report of all investigations, documenting all corporate officers involved and all action taken

base fine

the greatest of: - the monetary gain to the organization from the offense - the monetary loss from the offense caused by the organization, to the extent the loss was caused knowingly, intentionally, or recklessly - the amount determined by a judge based on an FSGO table

William Greider observed in One World, Ready or Not

the growth of transnational corporate investments, has obliterated the understanding of trade. the traditional role is eclipsed by an alternative system: trade generated within the multinational companies themselves as they export and import among their own foreign-based subsidiaries