Week 7

Question 1

Which four aspects belong to the business environment?

Answer 1

• Economical aspects
• Cultural aspects
• political aspects
• legal aspects
  The legal aspect is important but it comes from the political. Overall the legal aspect is close to all other apsects.

Question 2

Which are the two areas of compliance?

Answer 2

• National and International Laws
• formal voluntar rules (codes like code of conduct) and informal voluntary rules

Question 3

Six sort of rules: Law

Answer 3

In given jurisdiction, these rules apply to everybody. Like laws on human rights, personal and marital affairs, property & estate matters ect.
Exp. OR

Question 4

Six sort of rules: Regulations

Answer 4

Are laws that only effect specific situations & industries.
Exp. regulations on environmental protection, construction and instustry regulations on banking and finance or pharmaceuticals.

The more money people make, the more regulations they have

Question 5

Six sort of rules: Contracts

Answer 5

rules on which company agrees with another party with view to making & implementing a transaction. Agreement between min. 2 parties.
Exp. mandates, employment contracts, procurement contracts ect

Question 6

Six sort of rules: Self-regulations (formal, voluntary rules, Codes)

Answer 6

contractual rules comprise rules of self-regulation which certain industires, like banks, lay down between players. Self-regulation plays major role in areas where industry is under statutory law.

Companies are regulating their self more and more. It is easier to self-regulate before some tells you how to act.

-> ISO14001

Question 7

Six sort of rules: Governance rules (informal, voluntary rules)

Answer 7

Those rules which every company puts in place to organize and govern its own affairs.
Exp. policies, guidelines, norms, ect. (z.B. Kleidervorschriften)

-> Code of conduct

Question 8

Six sort of rules: soft laws and ancillary rules (informal, voluntary rules)

Answer 8

Not set in stone by lawmaker, regulator, internal authorities or agreed with counterpart. Rather, these rules emante from moral and ethical condiserations, instury standards, best practices, norms and standards beyond regulatory requirements, reputational considerations and demands by NGOs.

-> good behaviour

Unvalid infront of court of law.

Question 9

Stakeholder

Answer 9

is any person that has influence on the company (customer, employee, ect.)

Question 10

Doing business nationally (national production, supply, workforce, customers, ect.)

Answer 10

One legal framework applies

Question 11

Doing business internationally (purchase, supply, production, customers, workforce, management, ect. involve different nations and nationalities)

Answer 11

Foreign law may be applicable.
Exp. environmental law, real estate law, consumer protection, investor protections, labor law, taxes.

These laws are not uniform.

Question 12

International business - legal structures

Answer 12

1. Import / Export
2. Licensing / Franchising
3. Cooperation / Joint-ventures
4. Foreign branch / subsidary

Question 13

Corruption

Answer 13

Any dishonest or fraudulent behavior wherein someone uses their position of power to benefit themselves at the expense of others.

It includes many dishonest practices, such as:
➢ Embezzlement (Veruntreuung): theft or funds placed in one’s trust or belonging to one’s employer.
➢ Fraud (Betrug): wrongful or criminal deception intended to result in financial or personal gain.
➢ Nepotism (Vetternwirtschaft): favoring relatives or friends, especially by giving them jobs.
➢ Abuse of power.
➢ Collusion (Kollusion): secret agreement or cooperation for an illegal or deceitful purpose.
* Discussions about products, product development, pricing, technologies are forbidden
* Sharing information between suppliers who are competitors is unethical and, in many countries, violates the law. However, you can tell the first supplier that we have found better prices elsewhere without revealing the price or identity of the second supplier

Question 14

Bribery

Answer 14

Form of corruption

offering, promising, giving or soliciting of advantage as inducement for an action which is illegal, unethical or a breach of trust.

Active bribery: offering, promising or giving a bribe.
Passive bribery: requesting, agreeing to receive, or accepting a bribe.

-> only one form of corruption

Question 15

Most relevant anti-corruption legisaltion

Answer 15

➢ Swiss Criminal Code (SCC)
➢ US Foreign Corrupt Practices Act (FCPA; 1977)
➢ UK Bribery Act (2010)
➢ United Nations Convention against Corruption (UNCAC; 2005)
➢ OECD Convention on Combating Bribery of Foreign Public Officials (1999)

The US law is important for example because Americans need to pay taxes in the US even they live in CH.

Question 16

Acitve bribery of swiss public officals

Answer 16

Art. 322ter Swiss Criminal Code (SCC)
Any person who offers, promises or gives a member of a judicial or other authority, a public official, an officially-appointed expert, translator or interpreter, an arbitrator, or a member of the armed forces an undue advantage, or offers, promises or gives such an advantage to a third party in order to cause the public official to carry out or to fail to carry out an act in connection with his official activity which is contrary to his duty or dependent on his discretion, shall be liable to a custodial sentence not exceeding five years or to a monetary
penalty.

Question 17

Undue advantage (according to SCC)

Answer 17

➢ Material or immaterial:
- Cash
- Stocks
- Works of art
- Study fees, tuitions
- Invitations
- Watches
- Medical treatments
- Donations

➢ In person or via third parties:
- Agent
- Advisers
- Fake firm
- Retailer

The advantage is undue if the offender is not authorized to accept it.
The Swiss Criminal Code does not establish general quantitative or qualitative
limitations on hospitality expenses such as gifts, travel, meals, entertainment.

Question 18

Passive bribery by swiss public officals (acceptance of bribes)

Answer 18

Art. 322quater SCC
Any person who as a member of a judicial or other authority, as a public official, officially-appointed expert, translator or interpreter, or as an arbitrator demands, secures the promise of or accepts an undue advantage for that person or for a third party in order that he carries out or fails to carry out an act in connection with his official activity which is contrary to his duty or dependent on his discretion, shall be liable to a custodial sentence not exceeding five years or to a monetary penalty

Question 19

Bribery of swiss public officals (granting or acceptance of advantage)

Answer 19

Art. 322quinquies SCC
Any person who offers, promises or gives a member of a judicial or other authority, a public official, an officially-appointed expert, translator or interpreter, an arbitrator or member of the armed forces an undue advantage for that person or for a third party in order that the person carries out his official duties shall be liable to a custodial sentence not exceeding three years or to a monetary penalty.

Art. 322sexies SCC
Any person who as a member of a judicial or other authority, as a public official, officially-appointed expert, translator or interpreter, or as an arbitrator, demands, secures the promise of, or accepts an undue advantage for himself or for a third party in order that he carries out his official duties shall be liable to a custodial sentence not exceeding three years or to a monetary penalty.

–> here only something gets accelerated with money but nothing illegal is done. Exp. I pay money to a offical that I get my passport faster

Question 20

(acitve and passive) bribery of foreign public officals

Answer 20

Art. 322septies SCC
Any person who offers, promises or gives a member of a judicial or other authority, a public official, an officially-appointed expert, translator or interpreter, an arbitrator, or a member of the armed forces who is acting for a foreign state or international organization an undue advantage, or gives such an advantage to a third party, in order that the person carries out or fails to carry out an act in connection with his official activities which is contrary to his duties or dependent on his discretion shall be liable to a custodial sentence not exceeding five years or to a monetary penalty.

any person who as a member of a judicial or other authority, a public official, an officially-appointed expert, translator or interpreter, an arbitrator, or a member of the armed forces of a foreign state or of an international organization demands, secures the promise of, or accepts an undue advantage for himself or for a third party in order that he carries out or fails to carry out an act in connection with his official activity which is contrary to his duty or dependent on his discretion shall be liable to a custodial sentence not exceeding five years or to a monetary penalty.

Question 21

Active bribery of private individuals

Answer 21

Art. 322octies SCC
1 Any person who offers, promises or gives an employee, partner, agent or any other auxiliary of a third party in the private sector an undue advantage for that person or a third party in order that the person carries out or fails to carry out an act in connection with his official activities which is contrary to his duties or dependent on his discretion shall be liable to a custodial sentence not exceeding three years or to a monetary penalty.
2 In minor cases, the offence is only prosecuted on complaint.

–> just because everybody is doing something illegal it dosn’t become legal

Question 22

Passive bribery of private individuals (accepting bribes)

Answer 22

Art. 322novies SCC
1 Any person who as an employee, partner, agent or any other auxiliary of a third party in the private sector demands, secures the promise of, or accepts an undue advantage for himself or for a third party in order that the person carries out or fails to carry out an act in connection with his official activities which is contrary to his duties or dependent on his discretion shall be liable to a custodial sentence not exceeding three years or to a monetary penalty.
2 In minor cases, the offence is only prosecuted on complaint.

Question 23

! corporate criminal liabilit - liability under the criminal law

–> important for the exam

Answer 23

Art. 102 SCC
1) If a felony or misdemeanor is committed in an undertaking in the exercise of commercial activities in accordance with the objects of the undertaking and if it is not possible to attribute this act to any specific natural person due to the inadequate organization of the undertaking, then the felony or misdemeanor is attributed to the undertaking. In such cases, the undertaking is liable to a fine not exceeding CHF 5M.
2) If the offence committed falls under articles 260ter, 260quinquies, 305bis, 322ter, 322quinquies, 322septies paragraph 1 or 322octies, the undertaking is penalized irrespective of the criminal liability of any natural persons, provided the undertaking has failed to take all the reasonable
organizational measures that are required in order to prevent such an offence.
3) The court assesses the fine in particular in accordance with the seriousness of the offence, the seriousness of the organizational inadequacies and of the loss or damage caused, and based on the economic ability of the undertaking to pay the fine.
4) Undertakings within the meaning of this title are:
a) any legal entity under private law;
b) any legal entity under public law with exception of local authorities;
c) companies;
d) sole proprietorships.

–> If an employee is found guilty then also the company will be considered if they have done anything to prevent the offence.

Question 24

US Foreign corrupt practices act (FCPA; 1977)

Answer 24

The FCPA:
- prohibits the bribing of foreign public officials
- requires publicly traded companies to maintain accurate books and records¨

Scope:
➢ Exterritorial (i.e., anywhere in the world)
➢ Applicable to US persons and companies, as well as to foreign individuals or
companies using US instrumentalities (e.g., phone call, e-mail, text, fax, wire
transfer from, to or through the USA), or while physically present in the USA.

Penalties (regarding bribes):
- For individuals
➢ Monetary penalty up to USD 100K and imprisonment up to 5 years
- For companies
➢ Monetary penalty up to USD 2M

–> If you are guilty in Switzerland and for example this was payed in USD you can also be accused (angeklagt) in the US.

Question 25

UK Bribery Act (2010)

Answer 25

The UK Bribery Act sanctions active and passive bribery in the public and
private sectors.

Scope
➢ Extraterritorial (i.e., anywhere in the world)
➢ Applicable to UK persons and companies, as well as to foreign individuals or companies carrying (part of a) business in the UK (e.g., one customer is sufficient), or while physically present in the UK.

Penalties
- For individuals
➢ Unlimited monetary penalty and imprisonment up to 10 years
- For companies
➢ Unlimited monetary penalty

–> If just one partie is from the UK you an also be accused (angeklagt) in the UK.

Question 26

Compliance responsibilty

Answer 26

Board of directors –> main responsibility
Management board –> the responsibility can also be here
–> as soon a company is mid-sized they have a management board and here the management has the main responsibility.
In small companies you often just have a board of directors

Question 27

Board of directors (Verwaltungsrat)

Answer 27

• is appointed to act on behalf of shareholders to run day-to-day affairs of the business
• board members are directly accountable to shareholders and each year the old an annual general meeting where they need to provide report to shareholders
• To the extent that the powers and responsibilities are not reserved to the board of directors by art. 716a Swiss Code of obligations, they may be delegated to one or several managers or a management board.
• For medium and large-sized companies it is customary to delegate management to management board.
• board of directors is responsible for overall management of stock corporation and for ultimate supervision of people entrusted with management.

Question 28

Duties of the board of directors (1)

Answer 28

Art. 716 Swiss Code of obligations / Duties
1. In general
1) The board of directors may pass resolutions on all matters not reserved to the general meeting by law or the articles of association.
2) The board of directors manages the business of the company, unless responsibility for such management has been delegated

Question 29

Duties of the board of directors (2)

Answer 29

Art. 716a Swiss Code of obligations / Duties
2. Non-transferable duties
1) The board of directors has the following non-transferable and inalienable duties:
1. the overall management of the company and the issuing of all necessary directives;
2. determination of the company’s organization;
3. the organization of the accounting, financial control and financial planning systems as required for management of the company;
4. the appointment and dismissal of persons entrusted with managing and representing the company;
5. overall supervision of the persons entrusted with managing the company, in particular with regard to compliance
with the law, articles of association, operational regulations and directives;
6. compilation of the annual report, preparation for the general meeting and implementation of its resolutions;
7. filing an application for a debt restructuring moratorium and notifying the court in the event that the company is overindebted;
8. in the case of companies whose shares are listed on a stock exchange: preparing the remuneration report.
2) The board of directors may assign responsibility for preparing and implementing its resolutions or monitoring transactions to committees or individual members. It must ensure appropriate reporting to its members

Question 30

Duties of the board of directors (3)

Answer 30

Art. 716b Swiss Code of obligations / Duties
3 Delegation of business management
1) The articles of association may authorize the board of directors to delegate the
management of all or part of the company’s business to individual members or third
parties in accordance with its organizational regulations.
2) These regulations regulate the management of the company’s business, stipulate the bodies required to carry this out, define their duties and, in particular, regulate the company’s internal reporting. On request, the board of directors issues information in writing concerning the organization of the business management to shareholders and company creditors with a demonstrable interest warranting protection.
3) Where management of the company’s business has not been delegated, it is the
responsibility of all the members of the board of directors

Question 31

Compliance Management system (definition)

Answer 31

CMS consists of integrated system of documents, proccesses, tools, controls and functions to make it easierr for organization to comply with legal requirements.

CMS helps organizations better addres risk management by assuring that their policies and procedures adhere to the requirements of applicable laws and regulations and address training, communications and monitoring

Question 32

Compliance Management system (CMS) - gross vs. net risks

Answer 32

No CMS - gross risks
With CMS - reduce the legal risk –> net risks and your riskappetite

–> zero risk and riskappetite doesn’t exists

–> see page 37

Question 33

Compliance Management system (CMS) - Elements (1)

Answer 33

(1a) Analyze relevant statutes and codes: Identify all statutes as well as mandatory and voluntary codes
that apply to the company.
(1b) Assess compliance risks: Risk assessment is to identify and assess the legal risks.
(2) Develop a compliance strategy and operational targets: The compliance strategy includes allocation of the necessary
resources, prioritization of measures to be taken, and a timeplan.
(3a) Develop a compliance organization: Organizational measures determine the person responsible and the specific function, such as a compliance officer.
(3b) Develop procedural measures (prevent, detect, respond): Prevent: all procedural measures to prevent misconduct. For
example, training and policies.
Detect: procedural measures for detection in the event of misconduct. For example, a whistleblowing hotline or compliance investigations.
Respond: procedural measures to respond if a compliance event has been investigated and confirmed. For example, an official warning or the termination of an employee’s work contract.

Question 34

Compliance Management system (CMS) - Elements (2)

Answer 34

(3c) Develop a compliance culture: Senior and middle management influence the compliance culture (“tone from and at the top”). This culture forms the link between all the elements of the CMS.
(3d) Report and communicate: All measures must be documented, checked for ffectiveness, and reported to the board of directors. All compliance measures must be communicated throughout the company.
(4) Check effectiveness of measures and introduce improvements: Improvements are necessary wherever measures taken prove to be ineffective

Question 35

What is a code of conduct in the workplace?

Answer 35

A code of conduct is a policy that outlines principles and standards that all employees and third parties acting on behalf of the company must follow.

Question 36

Why is it important to have a code of conduct?

Answer 36

A code of conduct serves as a reference point for employees to make better choices on a day-to-day basis. It should lay out the guiding principles by which employees should act and help them make the right decision. Having a strong, ethical code of conduct is essential to building a culture of compliance throughout an organization. A code of conduct is an excellent exercise to focus all employees on how they should behave and the standards they should defend

Question 37

What should be included in a code of conduct?

Answer 37

A code of conduct needs to be tailored to the business it represents, i.e. there is not one set of code of conduct that every company can use. However, there are certain characteristics that all companies should include in their code of conduct:
➢ Fully supported by leadership.
➢ Written for the reader.
➢ Comprehensive: it should cover all areas that impact the daily lives of employees.
➢ Accessible: it must be available to all employees and investors.

Question 38

What are the advantages of a code of conduct?

Answer 38

It gives employees a structure and rules to follow from the moment they join the company. It reduces the chances of problems occurring, and makes the process of dealing with issues a lot easier

Question 39

Whistleblowing

Answer 39

is a person, usually an employee, who exposes information or activity
within a private, public, or government organization that is deemed illegal, illicit, unsafe, fraud, or abuse of taxpayer funds.

Those who become whistleblowers can choose to bring information or allegations to surface either internally or externally. Most of whistleblowers report internally to a supervisor, human resources, compliance, or a neutral third party within the company, with the thought that the company will address and correct the issues. Externally, a whistleblower can bring allegations to light by contacting a third party outside of the
organization such as the media, government, or law enforcement