Page 1 of 8

Business ethics Nguyen Dinh Quyen qnguyen0181@student.bristoluniversity.edu Bristol University BU !!!" Business #thics $ctober 1%th& '01(

BU )N#

#*+), BUSINESS ETHICS

Page 2 of 8

Identify the stakeholders involved in the ethical decision-makin !rocess in electin "hether to com!ly# *he arbanes-$.ley /ct of '00' 0ade significant changes to the 1ay that cor2orate finances are dealt 1ith. )t requires the acce2tance of the 0ain sta3eholders includes" the board of 0e0ber& the investor& the 1histle blo1er& the shareholder to a22ly the arbanes-$.ley /ct of '00'. *he /ct requires cor2orate e.ecutives to ta3e 2ersonal res2onsibility for the accuracy of the financial re2orts of the cor2oration. *hat 2rovision& ection (0' 415& requires the ,#$ and ,6$ of the cor2oration to sign off on quarterly financial re2orts. $ther sections require the disclosure of s2ecific financial docu0ents fro0 the tea0 0e0bers& the disclosure of 3no1n conflicts of interest& the inclusion of 2rovisions for stricter 2enalties for 1hite-collar cri0es& and 2rovisions for 2rotections for cor2orate 1histleblo1ers. *he /ct is ad0inistered by the ecurities #.change ,o00ission 47 #,85. *he #, created the Public ,o02any /ccounting $versight Board 47P,/$B85 to handle arbanes-$.ley. *he P,/$B functions as an inde2endent auditor and is charged 1ith ensuring co02liance 1ith the /ct. 415 *he arbanes-$.ley /ct 4 $9 '00'5 requires that all that co02any tea0 0e0bers includes" the board of 0e0bers& the investors& the shareholders& the staff 0e0bers:need to 2artici2ate in the 2rocess " U!date the CE$ and C%$ on the financials of the com!any on a re &lar 'asis# *he arbanes-$.ley /ct requires that co02any e.ecutives sign off on quarterly financial disclosures. )n order for the e.ecutives to honestly co02ly 1ith this require0ent& they 0ust be 1ell infor0ed about the co02any;s financials. $f course& this ste2 is vital to running any successful business& but

BU )N#

#*+),

Page ( of 8

it is even 0ore i02ortant 1hen those e.ecutives 0ay be 2ersonally sub<ect to consequences for failing to understand and sign off on these issues. Hire a cons&ltant or desi nate an internal em!loyee to follo" the re)&irements of the *C+$B# *he P,/$B sets forth require0ents that co02anies 0ust co02ly 1ith. o0eti0es the require0ents change fro0 quarter to quarter or year to year& and it is the co02any;s res2onsibility to 3no1 of the require0ents and co02ly 1ith the0. ,esi nate an inde!endent committee to oversee a&dits# *his grou2 of outside individuals 4not e02loyees or directors of the cor2oration5 1ill be in charge of hiring the co02any;s auditor& establishing the 2rocedures that the auditor 1ill abide by& and ensuring that the auditor that they hire 1ill 2erfor0 her <ob effectively. *he audit co00ittee 0e0bers by la1 0ay not have any other relationshi2 1ith the co02any and 0ay not receive co02ensation for any other services 2erfor0ed for the co02any. Identify some of the reasons the cor!oration sho&ld consider doin so or not doin so# Be s&re to &se e-am!les from yo&r c&rrent em!loyer and.or '&siness e-!eriences in analy/in these reasons# *he 2rinci2al e.ecutive officer and the 2rinci2al financial officer 2erfor0ing si0ilar functions 0ust certify in each annual or quarterly re2ort filed or sub0itted that" 1. )t 1as revised by the one signing it. '. *o 0a3e sure that the re2orts do not contain any untrue state0ent of a 0aterial fact or o0it to state a 0aterial fact necessary in order to 0a3e the state0ents .=a3ing sure that those state0ents 1ere not false.

BU )N#

#*+),

Page 0 of 8

(. Based on the officer>s 3no1ledge& the financial state0ents& and other financial infor0ation included in the re2ort& reasonably 2resent in all 0aterial res2ects the financial condition and results of o2erations of the issuer as of& and for& the 2eriods 2resented in the re2ort. ?. @hoever is signing 4officer5 is res2onsible for establishing and 0aintaining internal controls& have designed such internal controls to ensure that 0aterial infor0ation relating to the issuer and its consolidated subsidiaries is 0ade 3no1n by others entities& 2articularly during the 2eriod in 1hich the 2eriodic re2orts are being 2re2ared. *hey have evaluated the effectiveness of the issuer>s internal controls as of a date 1ithin A0 days 415 2rior to the re2ort& and have 2resented in the re2ort their conclusions about the effectiveness of their internal controls based on their evaluation as of that date. !. *he signing officers have disclosed to the issuer>s auditors and the audit co00ittee all significant deficiencies in the design or o2eration of internal controls& 2rocess& su00ariBe& and re2ort financial data and have identified for the issuer>s auditors any 0aterial 1ea3nesses in internal controls& and any fraud that involves 0anage0ent or other e02loyees 1ho have a significant role in the issuer>s internal controls. C. *he signing officers have indicated in the re2ort 1hether or not there 1ere significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation& including any corrective actions 1ith regard to significant deficiencies and 0aterial 1ea3nesses. 4 $9 '00'5 Based on this infor0ation& ) found that $9 in a 2ositive 1ay& it is trying to be 0ore accurate in regards that every 0anager or officer is a1are of 1hat they are doing. +o1ever& 1e understand that because of $9 cost 0any cor2oration have to go through direct 4quantifiable5 and indirect 4non-quantifiable5 costs. 4Do1engrub& '00!.5 4'5*hese costs consist in increases in

BU )N#

#*+),

Page 1 of 8

2ersonal liability obligations& associations 1ith internal control i02rove0ents& and financial 0ar3ets. *hese 1ill be considering the negative effects. +o1ever& 1hen 1e co02are the 2ositive 2oints 1ith the negative effects& ) 1ill not hesitate to a22ly the $9 because of 0y business e.2eriences sho1 that the results of $9 1ill be bigger a lot 0ore than of the cost of $9. )n '00A& ) 1or3ed in the foreign co02any in language testing service. )t is a 0ediu0 siBe branch in Eietna0. *he director decided to assign an inca2able accounting co02any to handle this <ob even though it had so0e bad 0entioned e.2eriences fro0 other clients. +o1ever& he still decided to choose the0 because of their chea2 cost. /fter 1 year& the ta. office discovered 0any 0ista3es fro0 our financial re2orts. *hey 0ade a hard 2unish0ent to our co02any. *he da0age is bigger a lot 0ore than the hired cost 1e econo0iBed. ,isc&ss "hat kind of financial and ethical miscond&ct the cor!oration sho&ld a&dit and mana e internally to remain in com!liance "ith the Sar'anes-$-ley +ct# 7=isconduct8 is defined as 7any behavior that violates the la1 or organiBational ethics standards8 4#thics Fesource ,enter& '00!54(5. 6inancial and ethical 0isconduct disasters constitute serious costly ris3s to the continuity and survival of a business. Fegular headlines reveal that brea3do1ns of integrity collectively cost businesses billions of dollars in litigation& fraudulent financial acts& increased costs& fines& re2utation and i0age da0age& custo0erGclient trust& lost sales and recovery costs& and 2otentially land senior 0anage0ent in 2rison. No co02any is i00une fro0 these threats. *he cor2oration should audit and 0anage internally the belo1 3ind of 0isconduct activities to re0ain in co02liance 1ith the arbanes-$.ley /ct " %inancial miscond&ct include 2rice-fi.ing& or an illegal agree0ent bet1een industry co02etitors to Hfi.H the 2rice of a 2roduct at an artificially inflated levelI 2hysicians 1ho refuse to treat non-insured 2atients& or 2erfor0 unnecessary 2rocedures to 0a3e 0ore 0oneyI ta. evasionI

BU )N#

#*+),

Page 2 of 8

ta. fraudI and Hcoo3ing the boo3sH to 0a3e the co02any loo3 0ore 2rofitable than it is. $ther 2ossibilities include 2aying un<ustifiable salaries and bonuses to to2 officials regardless of 1or3 2erfor0ance& so0eti0es in s2ite of it& and chasing short-ter0 2rofit by 2lacing investor>s 0oney in questionable invest0ents. *he da0age of above financial 0isconduct can lead to the re2orted results 1ere categoriBed as follo1s" 4?5 J J ,orru2tion& e.g bribery 6inancial =is0anage0ent& e.g failure to follo1 2rocure0ent 2rocedures& @asteful and fruitless e.2enditure& Pay0ent to service 2rovider 1ithout receiving goods J J )nsider trading& e.g stoc3 insider trading 6raud& e.g clai0 fraud& ocial grant fraud& ubsistence and *ravel clai0 fraud& ,a2turing fraudulent transactions& Petty cash fraud: J J *heft& e.g *heft of la2to2& 2etrol& food& 2etty cash& cheques =isa22ro2riation and abuse& e.g abuse of Kovern0ent Karage vehicle& Petrol card abuse& /buse of tele2hone: J Kross negligence& e.g loss of state 2ro2erty& unauthoriBed e.2enditure Ethical cor!orate miscond&ct to1ard e02loyees or other 1or3ers in the su22ly chain " =any U. . cor2orations used third- 1orld s1eatsho2s to 2roduce their goodsI so0e have even been found to use child labor. #very year& la1suits are filed against e02loyers 1ho are accused of se.ual harass0ent or discri0ination against their e02loyees. o0e e02loyers have been sued for threatening or firing 1histle-blo1ers& or e02loyees 1ho 2oint out illegal 2ractices or safety violations in the 1or32lace. o0e U. . businesses use undocu0ented 1or3ers because they can 2ay the0 less than 0ini0u0 1age.

BU )N#

#*+),

Page 3 of 8

,or2orate 0isre2resentation can ta3e 0any for0s. )t can be as si02le as a sales0an 1ho lies about his co02any>s 2roducts& or it can be false or 0isleading advertising. =isre2resentation can involve a cover u2 of illegal 1or32lace conditions or transactionsI falsified data in a shareholder re2ortI lying to a union about cor2orate 2rofitsI or hiding or denying safety 2roble0s 1ith a 2roduct. $ther e.a02les include cor2orate board 0e0bers 1ith conflict of interests& doctors 1ho 2ush the 0ost e.2ensive drugs rather than the 0ost effective ones& and bro3ers 1ho reco00end stoc3s that they o1n in an effort to drive u2 the 2rice. Concl&sion $9 0ight have 2ositive and negative effects. Nevertheless& the different and big 2roble0s of 2ast years do not 2resent satisfactory reasons to decline or re0ove $9 require0ents or to ado2t significant e.e02tions based on co02any siBe. =oreover& $9 co02liance is 0andatory for 2ublic cor2orations and thus resources 0ust be allocated to its i02le0entation.

BU )N# 4eferences

#*+),

Page 8 of 8

+art0an& D.& L DesMardins& M. 4'0115. Business Ethics: Decision-Making for Personal Integrity & Social Responsibility 4'nd ed.5. Ne1 Nor3" =cKra1-+ill +igher #ducation. 415 htt2"GGen.1i3i2edia.orgG1i3iG arbanesO#'O80OA($.leyP/ct 4'5 htt2"GG111.s-o..co0Gds2Pget6eaturesDetails.cf0Q,)DR11?1 4(5 htt2"GGeBinearticles.co0GQ*he-Business-of-#thics-and-*he-#thics-ofBusinessLidR?!08?% 4?5 htt2"GG1eb.u2.ac.BaGsitefilesGfileG?CG!'('G6inancialO'0=isconduct.22t