15 Ethical considerations for Organization

Question 1

FCPA 1977

Foreign Corrupt Practices Act

Answer 1

1. Accounting
   a. Books and Records: required to keep books that properly reflect TRANSACTIONS and DISPOSITIONS of ASSETS. Auditor ATTESTS to accuracy

b. Internal Control: maintain INTERNAL CONTROL sufficient to ensure mgt’s control, authority and responsibility over assets.

No one individual is responsible. Company as a whole is.

2. Anti-Bribary:
   a. No one may OFFER/AUTHORIZE corrupt payments to
   
   • FOREIGN POLITICAL PARTY OR OFFICIAL of party
   • FOREIGN OFFICIAL
   • CANDIDATES FOR POLITICAL OFFICE

• Domestic-Whether or not required to file SEC Reports, or doing business overseas
• any issuers required to report to SEC
• biz/indivuduals acting corruptly while in US
• Other than 3 above is not addressed ie(commercial bribery)here

Financial Institutions must have controls to prevent MONEY LAUNDERING AND TERRORISM.

Question 2

FCPA

Definition of Corrupt Payment

Answer 2

• mere OFFER or PROMISE prohibited
• PASSIVE (receiving) NOT prohibited by FCPA

Payments are prohibited if briber knew or should have known they could improperly influence a government official

Question 3

FCPA violation

Answer 3

• person subject to fine/imprisonment
• company can be fined
• fines on person’s can’t be paid by company

Question 4

Facilitation Payments

Answer 4

• payments to receive something already entitled to
• Receipt if bribe is routine for the official
• should be accounted for
• allowed to prevent unfair competition

Question 5

UKBA

UK Bribery Act of 2010+-

Answer 5

4 Offenses

1. Offering, promising or GIVING advantage
2. Requesting, agreeing to receive, accepting an ADVANTAGE
3. Bribery of a FOREIGN public Official
4. Failure to PREVENT bribe being PAID to gain or retain business or Business Advantage

**This covers foreign officials AND COMMERCIAL bribery, PASSIVE bribery and FAILURE TO PREVENT as a Commercial Organization.

**HAS broadest impact worldwide.
1. UK Companies doing business overseas:
bribery to obtain, retain business advantages.
2. Foreign companies with operation IN UK:
liable under UKBA
***Same violation penalties. Fines, imprisonment, organization fines

Question 6

Benefits of Ethical Behavior

Answer 6

A, E, I CSS
Avoid Legal Problems
Enhance Customer Loyalty
Improve brand reputation
Create positive work environment
Support employee satisfaction
Satisfy need to do right thing

Question 7

Code of Conduct

Answer 7

Outlines required/prohibited behaviors

Should be:

a. accessible
b. understandable
c. Relevant to company specific issues
d. Supported by TRAINING and COMMUNICATION

Question 8

GROUPTHINK

Answer 8

individuals become more loyal to group than to making best decision. Produces more extreme decisions.

Question 9

Diversity of Thought

Answer 9

Greater diversity = evaluation of more viewpoints.

Less extreme decisions

In compliance with ethics of company

Question 10

IMA Values and Ethics

Answer 10

• Organization has responsibility to foster ethics
  if no defined code, employees act on their own beliefs

Pervasive sense of ethics can benefit org. Processes guide, but what about unplanned situations. Defined set of values guides in unplanned.

Defined sense of ethics distinguishes between ethical and merely legal.

Leadership by example (tone at the top) is important. Ethics applies to everyone

The concept of “Human Capital” is important in creating a climate of “do the right thing. It is a critical asset. If hiring, orientation, training fail to address individual values and ethics …negative impact. Dev and Deploy of values based ethical culture is a cornerstone of org. A benchmark for hiring. to align with org expectations.

Question 11

Two Methods for monitoring Ethical Compliance

Answer 11

Human Performance Feedback Loop
Performance review should be aligned with ethical conduct and be REVIEWED. KPI’s include tracking ee’s ethical performance.

Survey Tools
Employees are surveyed how well the org is following code of ethics.

Question 12

Whistleblowing Framework

Answer 12

Effective feedback system includes confidential method for ee’s report possible violations.

SOX mandates SEC registered have a hotline

Question 13

Three tools to identify process controls related to ethical an behavioral issues.

Answer 13

BPR (Business Process Re-engineering)
- provides a STRUCTURED view of org processes. at each step there are risks. consider behavioral aspects for the risk and control.

QM (Quality Management)
QM tries for zero defects. from a BEHAVIORAL perspective, helps identify types of controls that should be in place. uses approach of behavioral deviation.

CPI (Continual Process Improvement)

• a LEARNING organization
• existing controls may need to be adapted to new, changing environments

Question 14

CSR

Corporate Social Responsibility and Sustainability

Answer 14

Responsibility of Company for impact on stakeholders and company.

Does this by Behaving Ethically, Legally, Transparently.

a. maximizes positive impact, minimizes negative
b. CSR accomplished through CORE VALUES or PHILANTHROPIC programs
c. Done because it is DEEPLY ROOTED, not required

SUSTAINABILITY
a. focuses on long term vitality, therefore position in society and environment

a. org takes measures to ensure it can sustain itself
b. includes social license to operate (build trust in community)

Major issues:
Taxes: pay fair share
Environment: impact in environment minimized
Human Rights: ensure not violating
Corruption: refrain from engaging in corrupt activities.

Question 15

Four Levels of CSR (Corporate Social Responsibility)

ELEP

Answer 15

A Pyramid depicted below

a. Economic Responsibilities: company has to be viable
b. Legal Responsibilities: obey the law (don’t ignore gray areas. work on the spirit of the law)
c. Ethical Responsibilities: Not only legal obligations but above and do the right thing.
(sometimes not profitable)
d. Philanthropic: give back to society. compensation for their harm (pollution)