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Waivers of codes of conduct and E.
Section 406 of Sarbanes-Oxley requires companies to disclose whether or not they have adopted a code of E. for senior financial officers, and if not, why not.
The SEC regulations implementing section 406 ("SEC Implementing Regulations") define a code of E. to mean written standards that are reasonably designed to deter wrongdoing and to promote:
(i) honest and ethical conduct, including the ethical handling of actual and apparent conflicts of interest;
(ii) full, fair, accurate, timely and understandable disclosure in reports and documents filed with or submitted to the SEC and in other public communications;
(iii) compliance with applicable laws, rules and regulations;
(iv) prompt internal reporting of code violations to an appropriate person; and
(v) accountability for adherence to the code.
Companies must immediately disclose any amendments of the code in a public filing with the SEC on a Form 8-K or on the company's Internet site.
On November 4, 2003, the SEC approved NYSE Rule 303A.10, including a requirement that NYSE-listed companies adopt and disclose a code of B. conduct and E. applicable to all directors, officers and employees. Any waivers of the code for directors and executive officers may be made only by the board of directors or a board committee and must be promptly disclosed to shareholders.
But, what is a waiver? The SEC Implementing Regulations defines a waiver as "the approval by the registrant of a material departure from a provision of the code of E."
The NYSE and the Nasdaq have not articulated any definition of a waiver.
According to Walker, "Given the SEC's definition of a waiver as a material departure from a provision of the code, it would seem possible to draft a code so as to avoid the need to grant a waiver under most circumstances", since "Most of the requirements for contents of codes are broad enough that language could be drafted to minimize the need to authorize a departure".
Review Book Gertrude Himmelfarb: The Roads to Modernity
A new book from Gertrude Himmelfarb is called "Roads to Modernity". It provides an overview of the British, French and American Enlightenments with an implicit focus on moral and ethical aspects.
There are periods in time when the situation in the world, or at least in some countries appear to be right for fundamental changes in thinking to occur. One such period is called the Period of Enlightenment. It began in France around 1650, the British following from around 1700 and the period ended with the revolutions in America and France at the end of the century (c. 1800).
With many extremely influential thinkers such as:
- In France: de Montaigne, Pascale, Descartes, Voltaire, Rousseau, Turgot, de la Mettrie
- In Scotland/Britain: Shaftesbury, Locke, Hutcheson, Hume, Adam Smith, Wesley
- In the US: Jefferson, Washington, Hamilton, Adams, Franklin, Paine, and Burke
it can be said that the enlightenment was the period of time that gave us much of the philosophical underpinning of our current time.
In 'The Roads to Modernity' Dr. Himmelfarb (Professor emeritus of history - University of New York) discusses the Enlightenment as it happened in England, France and America. The biggest strengths of this book are:
- Himmelfarb's impressive historical knowledge that enables her to provide a very clear and sometimes humorous overview of the enlightenment period,
- The many precise bibliographical references and philosophers quotes she gives for further reading,
- Her accessible, succinct and captivating style (Once I started reading this book from Himmelfarb, it was difficult for me to stop), and
- (For us as ethical interested people) Himmelfarb's focus on moral and ethical aspects.
Himmelfarb's book is an explicit attempt to prove that while the Enlightenment has been considered as primarily a French happening, the American and particularly the British contributions were probably just as or even more significant.
As always, it is important to keep this starting point or assumption in mind when reading this superb book. If you do that, then you can forgive Himmelfarb for not being able to escape her own cultural biases, being an American herself and having written many books on the (British) Victorian time.
- For a positive view on the French, this is not the book you are looking for :-) The French in this book are pictured as getting everything wrong. They are dogmatically opposed to religion, contemptuous of the public, opposed to philanthropy, supportive to Enlightened Despotism while their emphasis on reason over all leads directly to the Terror of the French Revolution.
- Almost by surprise, at the end of the book the Americans get a lot of credits in being at this moment the closest to the 'ideal', which - as far as Himmelfarb is concerned - is the thinking at the time of the Social Virtues of Britain at the end of the 18th century.
Should you want to buy this fascinating book at Amazon or see more reviews, click here.
Finally: Himmelfarb historical excellence has inspired me to finally create a chronological view on my website Value Quotes. Click here for this history of ethics, moral, virtue, value and values in quotes. The page may also provide the more balanced view some people are looking for offering opinions from thinkers from other countries and from other periods as well as those from the Enlightenment.
Job seeking senior executives consider BE important
Only 2% of executives responding to the survey said that the company’s record of BE was altogether “unimportant,” and 15% said it was “important, but not a deal-breaker.”
When asked about specific companies, the survey’s respondents showed a mixed response to recent, highly-publicized corporate scandals. While some of the most public faces of corporate malfeasance seem to have hindered their ability to recruit top talent, others have come away with their recruiting functions largely in tact.
“The scarlet letter of scandal haunts corporate misbehavers today,” explained TheLadders.com founder and president, Marc Cenedella. “Our readers, who represent a cross section of the nation’s top $100K+ talent, clearly see the public images of the companies they work for as a reflection of their own credibility in the marketplace. But, we find it interesting that they are also drawing subtle distinctions between what’s an acceptable corporate misstep and what’s an outright reputational disaster.”
Should organizational DNA exclude E.?
Recently, consulting firm Booz Allen Hamilton used a DNA metaphor to determine the overall culture of an organization. In an S+B article called “The Four Bases of Organizational DNA”, three consultants, Gary Neilson, Bruce Pasternack, and Decio Mendes believe that better execution of B. strategies will be the key attribute of superior-performing organizations in the future.
In order to achieve a better execution of strategy, the four bases of BAH's organizational DNA are:
- Structure—What does the organizational hierarchy look like?
- Decision Rights—Who decides what?
- Motivators—What objectives, incentives, and career alternatives do people have?
- Information—What metrics are used to measure performance?
For Curtis C. Verschoor CMA "The absence in this analysis of any mention of Core Values as an important determinant of the culture of an organization is striking". In an article in the September 2004 issue of Strategic Finance, Verschoor has a point when he argues: "It is unwise, however, to ignore how important it is to an organization’s success that its management has the ability to articulate and then infuse a set of core values and the resulting ethical standards and code of conduct throughout the company. Motivation results from expression of the “soft” controls that unify an organization’s ability to perform effectively'. Moreover, "As stated in the COSO Principles, integrity and ethical values are critical to the establishment and maintenance of effective management controls".
International perspectives on CSR and ESR
Carolyn P. Egri of the Faculty of B., Simon Fraser University, Burnaby, Canada, and 23 representants of various international universities are now breaking the silence by announcing the results of a study called "Managerial perspectives on Corporate Environmental Responsibility and Social Responsibilities in 22 countries".
Participants in this study were 5,539 managers and professionals from 22 culturally, economically, and geographically diverse countries who responded to a mail survey.
Amongst the most important results of the study are:
- The economic development level in a country and the importance of corporate environmental responsibilities were not significantly related.
- The economic development level in a country and the relative importance of corporate social responsibilities were significantly related: managers from countries with a high GDP are more conducive to CSR than those from countries with a relatively low GDP.
Carolyn Egri can be contacted via Tel: 604-291-3456 or egri@sfu.ca
Marketing Chiefs' List of Ethical Concerns
- 48% of marketing executives believe improper accounting practices is number one among three top ethical issues facing U.S. bizz, followed by
- conflicts of interest (42%) and
- deceptive sales and marketing practices (42%).
Fully a third (31%) of marketing chiefs are not confident U.S. companies are taking appropriate actions to stem the tide of corporate scandals. In their careers as marketers, the executives say they have personally witnessed colleagues: participating in high pressure, misleading or deceptive sales tactics (45%); misrepresenting company earnings, sales and/or revenues (35%); withholding or destroying information that could hurt company sales or image (32%), and conducting false or misleading advertising (31%).
When asked the best way to deter future unethical behavior,
- 73% answered increasing penalties for offenders,
- 64% suggests employee education programs, and
- 52% recommends continued publicity about those being punished for unethical behavior. See full CMO Magazine Poll results
Valuation
The first interviewee was a journalist. His answer was "Twenty-two."
The second was a social worker. She said, "I don't know the answer but I'm glad we had time to discuss this important question."
The third applicant was an engineer. He pulled out a slide rule and showed the answer to be between 3.999 and 4.001.
The next person was a lawyer. He stated that in the case of Jenkins v Commr of Stamp Duties (Qld), two and two was proven to be four.
The last applicant was an accountant. The executive asked him, "How much is two and two?"
The accountant got up from his chair, went over to the door and closed it then came back and sat down. He leaned across the desk and said in a low voice, "How much do you want it to be?"
He got the job.
What should business ethics mean for consumers?
Ethical conduct pays off !
The following 7 Principles of B. Integrity are a good starting off place to consider. By integrating each of these principles within a company environment, a major step towards a responsible enterprise can be made.
Principle 1: Recognize that customers/clients want to do B. with a company they can trust; when trust is at the core of a company, it is easy to recognize. Trust defined is assured reliance on the character, ability, strength, or truth of a B.
Principle 2: For continuous improvement of a company, the leader of an organization must be willing to open up to ideas for betterment. Ask for opinions and feedback from both customers and team members and your company will continue to grow.
Principle 3: Regardless of the circumstances, do everything in your power to gain the trust of past customer's and clients, particularly if something has gone awry. Do what you can to reclaim any lost B. by honoring all commitments and obligations.
Principle 4: Re-evaluate all print materials including small B. advertising, brochures and other B. documents making sure they are clear, precise and professional; most important make sure they do not misrepresent or misinterpret.
Principle 5: Remain involved in community-related issues and activities thereby demonstrating that your B. is a responsible community contributor. In other words, stay involved.
Principle 6: Take a hands-on approach in regard to accounting and record keeping, not only as a means of gaining a better feel for the progress of your company, but as a resource for any "questionable " activities; gaining control of accounting and record keeping allows you to end any dubious activities promptly.
Principle 7: Treat others with the utmost of respect. Regardless of differences, positions, titles, ages, or other types of distinctions, always treat others with professional respect and courtesy.