Chapter 7 - Corruption and Ethics

Internal Controls

comprise a system of rules and procedures designed to ensure the accuracy and reliability of financial and accounting information

Advantages in technology

have revolutionized business and other aspects of society

Religion

is the broadest basis that society has for ethics and provides the internal justification for many ethical acts 1. providing safe working conditions 2. treating employees fairly 3. protecting the environment

Charles Ponzi

most infamous frauds of all time, tricking thousands of new england residents into investing in a postage stamp speculation

Purpose of ethics

to direct business men and women to abide by a code of conduct that faciliates and encourages public confidence in their products and services

What is the relationship between ethics and economic progress?

trust

Foreign Corrupt Practices

Response to corruption and bribery of foreign government officials by managers of u.s companies

Most infamous scandals

1. Enron -highly regarded energy company in houston, companies assets and profits were over-stated (most infamous scandal in U.S this led to Sarbanes Oxley act) 2. WorldCom -Company manipulated earnings using fraudulent accounting 3. Vivendi -has operations in music, television and film, publishing (multinational corp-Paris) 4. Parmalat -italian based, dairy and food product corporation, became the world leading company in production - europes biggest bankruptcy

While making a profit is an appropriate and worthy goal; companies must fulfill their ethical responsibilities

1. Making quality products and services 2. Treating people within and outside the company with respect and dignity 3. taking care of the environment 4. being good corporate citizens in the communities

Internal controls - 2 categories

1. Preventing accidental errors and intentional misrepresentations from occurring 2. Identifying errors and irregularities after they occur so that corrective action may be taken

3 philosophical principles

Imperative; Do what is right (absolute moral rules) Generalization; do what is right, but filter the action by consideration of the consequence Utilitarian; do what produces the greatest good

integrity

adherence to moral and ethical principles 2 characteristics; knowledge & courage

Corporate social responsibility mandates

provide a quality product or service to its customers provide an appropriate return on investment to the companies stockholders treat its employees with dignity and respect take care of environment

Corporate Social Responsibility

refers to a companies obligations to society including the welfare of a wide range of stakeholders

ethics

refers to the guidelines by which people relate to; how they conduct business how they treat other people how they care for the environment (this defines how people view the world)

Unethical behavior

the result of not knowing the right thing to do, but it is often the result of lacking courage to do what is right