Business Ethics Final

Global Code of Conduct (Guidelines)

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. Cooperate 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.

Multinational Corporation

A company that provides and sells products and services across multiple national borders. Also known as Transnational Corporations. Website = MNC (usually)

Intranet

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

Code of Ethics

A company's written standards of ethical behavior that are designed to guide managers and employees in making the decisions and choices they face every day.

Death Penalty (FSGO)

A fine that is set high enough to match all the organization's assets—and basically put the organization out of business. This is warranted where the organization was operating primarily for a criminal purpose.

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.

Sarbanes-Oxley Act of 2002

A legislative response to the corporate accounting scandals of the early 2000s that covers the financial management of businesses.

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.

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. (IDEAL WITH NO ENFORCEMENT)

SOX Title II

AUDITOR INDEPENDENCE In addition to establishing the PCAOB, SOX introduced several key directives to further enforce the independence of auditors and hopefully restore public confidence in independent audit reports: 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 officers (chief executive officer, chief financial officer, controller) were employed by that accounting firm within the previous 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 Title V

Analyst Conflicts of Interest • Requires the SEC to adopt rules to address conflicts of interest that can arise when securities analysts recommend securities in research reports and public appearances—each of the "rogue's gallery" of companies in the 2001-2002 scandals had been highly promoted as growth stocks by analysts.

Thin Consent

Consent in which the employee has an alternative to unacceptable monitoring

Thick Consent

Consent in which the employee has little choice

SOX Title III

Corporate Responsibility • Requires audit committees to be independent and undertake specified oversight responsibilities. • Requires CEOs and CFOs to certify quarterly and annual reports to the SEC, including making representations about the effectiveness of their control systems. • Provides rules of conduct for companies and their officers regarding pension blackout periods—a direct response to the Enron situation where corporate executives were accused of selling their stock while employees had their company stock locked in their pension accounts.

SOX Title VIII

Corporate and Criminal Fraud Accountability • Provides tougher criminal penalties for altering documents, defrauding shareholders, and certain other forms of obstruction of justice and securities fraud. Arthur Andersen's activities in shredding Enron documents directly relates to this topic. • Protects employees who provide evidence of fraud. Enron and WorldCom were both exposed by the actions of individual employees (see Chapter 7, "Blowing the Whistle").

Sustainable Ethics

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

What does the UN Global Compact consist of?

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 of association and the 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.

A well-written code of ethics can do what?

It can capture what the organization understands ethical behavior to mean—your values statement. It can establish a detailed guide to acceptable behavior. It can state policies for behavior in specific situations. It can document punishments for violations of those policies.

FCPA (Foreign Corrupt Practices Act)

Legislation introduced to control bribery and other less obvious forms of payment to foreign officials and politicians by American publicly traded companies.what does it do? prevent bribery. facilitation payment.

Reactive Ethical Policies

Policies that result when organizations are driven by events and/or a fear of future events.

Proactive Ethical Policies

Policies that result when the company develops a clear sense of what it stands for as an ethical organization.

Who wrote the Global Code of Conduct?

Richard DeGeorge

Step 1: Fines FSGO (Financial Sentencing Guidelines for Organizations)

Step 1. Determination of the "Base Fine." The base fine will normally be 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.

Step 3: Determining the Total Fine Amount

Step 3. Determining the Total Fine Amount. The base fine multiplied by the culpability score gives the total fine amount. In certain cases, however, 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. This is warranted where the organization was operating primarily for a criminal purpose.

Step 2: Culpability Score

The calculation of a degree of blame or guilt that is used as a multiplier of up to four times the base fine. The culpability score can be adjusted according to aggravating or mitigating factors. Aggravating Factors • High-level personnel were involved in 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.

The Whistleblower Protection Act of 1989

addressed the issue of retaliation against federal employees who bring accusations of unethical behavior. Deadlines in addressing complaints and faster payment of settlement.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

introduced a new reward program for whistle-blowers who report securities law violations to the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC). $1 million = 10-30%.