Portfolio Project: The Legal Environment of Business
“What specific changes, if any, would you recommend to a policy maker to increase the effectiveness of corporate governance in this post-Enron era? Due to corporate scandals, most notable the Enron scandal there appears to be a decline in the confidence of leadership in the American business. The first round of scandals saw Congress pass the Sarbanes-Oxley Act which “requires companies to set up confidential systems so that employees and others can raise red flags about suspected illegal or unethical auditing and accounting practices.” (Cross, p. 81) Some companies, for example have implemented an icon on their work computers that employees can click on and be directed to a company that they can directly report ethical misconduct that alerts the companies ethics committee. Many politicians believe they can legislate ethics, the danger that accompanies this type of mentality is crippling our economic system by threatening the vibrancy of enterprise, undermining our market’s creativity and flexibility and damage our economic prospects. It is extremely important that businesses realize this and restore public trust through its own voluntary actions. The technology in today’s world is able to trace emails sent from high ranking executives that shows corporate greed has triumphed over sound ethics (Vogl). If American businesses are going to compete, there needs to be somewhat of a framework of integrity, honesty, and trust. Frank Vogl has created a 10 points of Ethics Model: Law. Operates in accord with the spirit, not just the letter of the law. Ethics Code. Place the corporate code of ethics at the center of corporate operations and decision taking and never, under any circumstances, set aside the code of conduct to permit special actions by executives. Honesty. Demand that all corporate employees, starting with the CEO, are truthful with their colleagues, their customers and when representing the enterprise to the public. Information sharing. Encourage managers to maximize the sharing of information with their subordinates and encourage transparency at all levels within the corporation. Equity and Employee Respect. Pursue policies of zero tolerance regarding all forms of sexual harassment in the workplace and discrimination on the basis of race, color, gender, and age. Whistleblowers. Management and the Board of Directors should ensure that whistleblowers are protected and indeed encouraged. When an employee sees wrongdoing, then he or she should be encouraged to report the malfeasance – at stake is the reputation of the company. Ethics Reporting. Require that senior corporate executives, including a chief ethics officer, report regularly and fully on the operational effectiveness of the corporate ethics code to the board. Accountability. Demonstrate to shareholders that members of the Board of Directors operate with the clear understanding that they are fully accountable. Boards should be seen to be bending over backwards to ensure honesty in corporate reporting and responding to shareholder requests for information and explanation. Compensation. Formulate approaches to executive compensation that recognize that this is a matter that contains within it key issues of ethics and, in this regard, ensure high levels of transparency in the deliberations of board compensation committees. Citizenship. Understand that American corporations, like decent citizens, must operate in ways that serve the core interests of the nation. Corporate scandals, starting with Enron’s collapse, have damaged the standing of our country in the world therefore our competitive system appears tarnished. When you have companies that cook books, have top executives who pocket fortunes irrespective of corporate performance and lie to shareholders and regulators damages how the entire world would view American business with skepticism and suspicion. In order to ensure that the...
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