ethics and morality in business
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This presentation was prepared ( As a guest lecture) for Northeastern University MBA studentsTRANSCRIPT
Crisis Of Trust
TYCO CEO’s $6000 shower curtain
Tyco probe may expand
$15000 Dog umbrella stand$14000 portable potty
SEC Bars Ex-Tyco Auditor
PricewaterhouseCoopers partner Richard P. Scalzo. Under the settlement, Scalzo, Tyco's lead auditor from 1997 to 2001, is permanently barred from working on any part of a public company's finances. The SEC found that Scalzo violated securities law by overlooking material facts in his audit of the company. Scalzo also shirked on the SEC's rules of professional conduct.
Enron files for bankruptcy
ENRON WHISTLE BLOWER
ENRON WHISTLE BLOWER
ENRON WHISTLE BLOWER
Here comes
the crook
Jeff,I heard You get vegetarian diet in the jail
I hope my jail mate is not former TYCO CEO
I love 5th amendment
Former Enron Exec Kopper to Plead Guilty
Kopper admitsto laundering and fraud, agrees to
help Feds in case
Wow ! My boss made so much money - but won’t give me a 5% raise?
Yes - You did !
Andersen CEO Andersen Partner
We did not ask him to
shred
Yes ! I ordered the shredding
Worldcom to restate the numbers
WorldCom facing world of obstacles
WorldCom files for bankruptcy
EBBERS GETS 25 YEARS
EBBERS GETS 25 YEARS
Former WorldCom chief, 63 years-old, could spend the rest of his life in prison.
Worldcom Controller
More Accounting Woes For Xerox
Xerox was forced to restate earnings to reflect $1.4 billion less in pre-tax profits over the past five years as part of a settlement with the SEC
which also included a $10 million penalty.
Adelphia CEO arrested
Adelphia Files Lawsuit Against John Rigas and Other Former Executives and Board Members of Adelphia
Adelphia CEO arrested
Qwest to restate the numbers
Federal regulators believe that Qwest Communications
International Inc.’s disclosure late Sunday night that it improperly
accounted for more than $1.1 billion of transactions during the past three years raises questions that need
further investigation, according to people
familiar with the matter
SEC gets tough on Qwest accounting
When did Martha call the broker ?Martha’s broker blames his assistant
Stewart convicted on all charges
Jury finds style maven, ex-broker guilty of obstructing justice and lying to investigators
Martha Stewart Gets 5 Months in Jail
Lea Fastow enters prison
Wife of ex-Enron CFO Andrew Fastow begins day one of one-year jail term Monday
Imclone CEO indicted
Feds want Waksal behind bars
In plea negotiations, prosecutors seek prison term of 7-to-10 years , indictments of family.July 30, 2002: 9:36 AM EDT NEW YORK (CNN/Money) - Federal prosecutors have demanded during plea negotiations that former ImClone CEO Samuel Waksal serve a 7- to 10-year prison term for charges related to insider trading and are not willing to let his family members get off easy, a source close to the situation confirmed to CNN/Money Tuesday.
ImClone’s CEO Arrested
ImClone’s complex connections
Salomon telecom analyst Grubman quits
Controversial Salomon Smith Barney telecommunications analyst Jack Grubman, once one of Wall Street's biggest stars and dealmakers, resigned Thursday.
Grubman, the subject of congressional and regulatory probes, is the latest casualty of the telecom meltdown that has wiped out $2 trillion in shareholder wealth and sent once-soaring companies, such as WorldCom and Global
Crossing, to bankruptcy court.
Too Close for Comfort
GE's legendary former CEO Jack Welch kicks up a controversy over his affair with a journalist
Jack Welch’s perks after retirement
The divorce papers filed by Welch's wife, Jane, detail his use of an $80,000 per month Manhattan apartment owned by the company, court-side seats to the New York Knicks and U.S. Open, seating at Wimbledon, box seats at Red Sox and Yankees baseball games, country club fees, security services, and restaurant bills,
SEC probes Williams energy trading
Inquiry into trading volumes, methods determining reserves
Aug. 16 — Opening a fresh line of inquiry into Williams Cos., the Securities and Exchange Commission has asked the energy concern for information about how it accounts for credit and “prudency” reserves associated with its trading business.
SEC Chief Vows Ongoing Audit Probe of Halliburton
SEC investigates Halliburton
Now that President Bush has alreadytold in public that SEC will clear Cheney –I wonder What else I can do!
Harvey PittChairman - SEC
Davide Dukcevich, 06.04.04, 1:00 PM ET
NEW YORK - Tech giant Computer Associates (nyse: CA - news -
people ) said that Chief Software Architect Sanjay Kumar will resign from the company as the firm tries
to resolve a criminal investigation into its accounting.
Computer Associates said it is committed to reaching a settlement of the government's probe as soon
as possible, and that Kumar's decision to step down was made in that spirit. Kumar, who resigned as
chairman and chief executive in April, will cease all involvement with
the firm, effective immediately.
Computer Associates' Sanjay Kumar Resigns
Senate passes fraud bill
Fraud bill rushed through Congress
Average investor - Screwed
Scamming CEOs have accomplished what Osama bin Laden could not – i.e. denting our spirit.
Can anything restore our faith in the stock markets?
Summer Of Mistrust
Many CEOs bend the rules (of golf)
In that survey, commissioned by Starwood Hotels & Resorts, 82 percent of 401 high-ranking corporate executives admit to being less than honest on the golf course
Morality and Ethics - Definition
Morality Involves limitations on behavior Limitations often benefit others Limitations are often contrary to self-
interest Limitations are based on principles of
right and wrong
Ethics Social rules that govern conduct Implementation of Morality + Etiquette Organizational ethics Personal Ethics: Informed by Sense of
(& Commitment to) Moral Standards Professional Ethics: Also informed by
professional self-interest
The Serbanes Oxley Bill
Sets guidelines for accounting oversight board with limited authority Names two things auditors can't do for audit clients and asks SEC to name more,
if needed Outlaws executive interference with audits Requires immediate disclosure of material information, including insider trades
and loans to officers Outlaws executive stock trades during pension-fund "blackout" periods Requires periodic disclosure of off-balance-sheet transactions, asks SEC if other
changes needed Tells companies to disclose when they change their ethics codes Tells SEC to toughen corporate transparency rules Tells SEC to review financial statements more often Makes accountants keep audit papers for 7 years Strengthens SEC's ability to bar violators from serving as corporate officers Lets SEC take profits from officers who sold stock before restating finances Tells SEC to give to Enron employees money it takes from Enron or Andersen officers Asks for government studies of analysts, corporate governance and other subjects Exempts investment companies from 6 of these requirements
Sarbanes-Oxley Act of 2002
Corporate responsibility Enhanced Financial disclosures Auditor independence Professional responsibility rules
for attorneys Public Company Accounting
oversight board Other provisions
• Research Analysts• Whistle blower protection• Corporate Tax Returns• Temporary Freeze Authority
Ethics
Trust
Morality
SEC paperwork requirements Serbanes – Oxley Bill aka Fraud Bill
10 Q to Personal liability
Not just companies with $1Billion revenue – But all public companies
Detailed certification witgh every 10K and 10Q
Corporate responsibility
Audit committees
Certification of Financial Statements
Improper influence
Bonus and compensation forfeiture following accounting statement
Insider trading pension fund blackout period
Enhanced Financial Disclosures
Accuracy of financial reports Off-Balance sheet transactions Presentation of Pro Forma
Financial information Prohibition on personal loans to
officers and Directors Reporting of stock transactions Internal Controls Code of ethics for senior
officers Audit committee financial expert Enhanced SEC review Real Time disclosures
Auditor independence
Prohibited Non-Audit services
Audit committee pre-approval of Audit and Non-Audit Services
Audit partner rotation
Reports to Audit committee
Conflicts of Interest
Other provisions
Research Analysts
Criminal provisions for destruction
Debts in Bankruptcy
Extended statute of limitations of security fraud claims
Whistleblower protection
Corporate tax returns
Temporary freeze authority
Officer and Director Bars
Antitrust – Contact with Competitors
Agreements or Understandings with Competitors
Discussions Regarding Price or Other Competitive Issues
Discounts and Production Limits
Trade Association Risks
Bid Rigging
Market Allocation
Supplier Antitrust Issues
E-mail Dangers
Gifts and Conflicts of Interest
Working Ethically with Suppliers, Vendors and other Business Partners
Receiving Gifts Receiving Hospitality and
Entertainment Giving Gifts Offering Hospitality and
Entertainment "Friends and Family" Stock
Offerings Investments as Potential
Conflicts of Interest Outside Employment Family Interests
Mutual Respect
Avoiding Workplace Harassment
Sexual Harassment "Electronic" Harassment Harassment on the Basis of
Race or Ethnicity Harassment on the Basis of
Age Harassment on the Basis of
Other Protected Characteristics
Reporting and Responding to Harassment in the Workplace
Price Discrimination (Robinson-Patman Act)
Illegal Price Discrimination in the Sale of Goods
Injuring Competition "Meeting Competition"
Defense "Cost Justification" Defense "Changing Market
Conditions" Defense "Availability" Defense
Code of Conduct – Doing business with Integrity
The Company's Commitment to Doing Business with Integrity
Handling Ethical Dilemmas (e.g., a Competitor's Confidential Information)
Compliance and Business Ethics Program
Code of Business Conduct Compliance Help line and
Other Program Resources Reporting Violations and
Asking Questions An Employee's Personal
Responsibility Policy Certification (optional)
EEO and Workplace Conduct for Managers
Avoiding Discrimination in Hiring
Employee Leave Issues Working with Disabled
Employees (ADA and related issues)
Wage and Hour Issues Dealing with Problems in the
Workplace Responding to Misconduct
and Complaints Avoiding Discrimination in
Terminations
Intellectual Property
Protecting Your Company's IP
Appropriate Use of Others' IP
Confidential Information
Trade Secrets
Trademarks
Copyrights
Patents
Summary
Ethics and Morality in an organization is a process and not an event
The Serbanes Oxley Bill is the first step _ We have long ways to go
Organizational ethics and Personal Ethics
Corporate responsibility
Auditor independence
Gifts and Conflicts of Interest
Code of Conduct – Doing business with Integrity
Finally : Many CEOs bend the rules (of golf)
Jay Srinivasan
h kn o uy
QUESTIONS ?QUESTIONS ?