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The Creation of Ethics Training Courses

The Creation of Ethics Training Courses

The world of business is not an easy one to traverse ethically, not least because business practices are becoming more and more complex with every year, and knowing what is and is not right in any given situation is similarly becoming more and more difficult. Those who work in business may not even have a blatant intention to act unethically, but may do so simply because they do not understand that what they are doing violates business ethics. 
Business ethics training stands out as more effective than simply having a corporate ethics statement or a corporate ethics code because such statements and codes may not successfully enter the minds of employees. Though every employee should, in theory, know what the corporate ethics code or statement of his or her workplace says, it is difficult to internalize a list of rules, such that even if those rules don’t matter 29 days out of 30, on the one day they do matter the employee will remember them.
This, then, is the important role that business ethics training plays for the average employee. Simply having a list of rules and standards is like giving the employee a list of game rules; anyone will learn those rules better by actually playing the game. Ethics training courses are a way to “play the game” of business while ensuring that those ethics rules are internalized for the employee.  
Such courses grew in prominence, as did business ethics codes, as such codes and statements often did not do the job of bringing employees to ethical practice effectively. This was partly due to the observation that simply having rules or guidelines for ethical business was not effective when brought to actual practice, as the situations encountered in actual business practice would often extend beyond those situations that the codes of conduct would cover.
Business people would then be left to either interpret those codes as best they could or make decisions based on their own ethical judgment, which oftentimes was not in sync with the ethical judgment of the company itself. Thus, most companies with a concern about business ethics wanted some way of bringing employees better in tune with the overall ethical standards of a given company.
Business ethics training arose to either help employees to internalize their company’s business ethics code or statement or to help those employees to grow a stronger ethical judgment of their own. In fact, some ethics training seminars attempt to perform both functions, so that any given businessperson will quickly be able to refer to his or her business’ code of ethics, while also still being able to make judgments on his or her own that would not then be deemed unethical in retrospect. 
The need for ethical practices in business arose out of many philsophical debates, as well as the understanding that a company with more ethical procedures would likely be considered more favorably by clients and consumers alike. Indeed, having business ethics training courses can only help to paint a company in a better light, just like having employees who follow business ethics rules will similarly strengthen the image of the company along with helping that company to avoid the pitfalls of poor ethical practice.

Regulating Business With the Sarbanes-Oxley Act

Regulating Business With the Sarbanes-Oxley Act

A major flaw that allowed for such scandals as the Enron scandal to occur was the low-level of funding given to the Securities and Exchange Commission (SEC).
The SEC, which, in theory, should have played a large part in preventing the Enron scandal, along with other scandals, was deemed severely underfunded in the time before the Sarbanes-Oxley Act was passed. One of the major elements of the Sarbanes-Oxley Act was to nearly double the budget of the SEC, along with giving the SEC power over determining exactly how to enforce Sarbanes-Oxley compliance among all the different spheres upon which the Act touched.
These two elements, along with many others, paved the way for the Sarbanes-Oxley Act to come into existence. Without such a seemingly perfect storm of elements, it is possible that the Sarbanes-Oxley Act would never have passed either the Senate or the House, but it came just as all members of Congress had realized unequivocally how numerous were the dangerous practices and elements that had allowed for the Enron and other scandals to occur.
As a further indicator of the time and climate in which it was created being the primary impetus behind its creation, the Sarbanes-Oxley Act actually came out of two separate bills: one proposed originally in the Senate and the other proposed originally in the House of Representatives. 
Each bill passed its Congressional vote in its originating body, and then the two bills were reconciled into a single, stronger Act. As a result, Sarbanes-Oxley compliance would require all the behavior and changes that both acts suggested, leading to a very strong, decisive shift in the many areas that had originally made the Enron and other scandals possible.
In the end, the Sarbanes-Oxley Act was passed almost unanimously, with remarkably little resistance, again showing that it was the right time for that bill to come into existence. It has significantly strengthened penalties against the actions that Enron officials took, and should go a long way towards preventing any further breaches of business ethics of such a flagrant nature in the future.

Criminality and Inflation of Reported Income

Criminality and Inflation of Reported Income

Enron inflated its profit and income figures in its accounting statements by using strange and arcane accounting procedures with intent to obfuscate the truth. For example, Enron used a type of accounting referred to as the “merchant model” in order to report its revenues.
Instead of reporting revenues only as trading or brokerage fees, Enron reported the value of the entire transaction as revenue, thus making the company’s apparent profit skyrocket. There was, in fact, no extra profit being made, but the simple change in accounting practices allowed Enron to appear as a much stronger company than it was, making the company appear to be growing yearly at a fantastic rate, while in truth it was not growing anywhere near as much as it might have seemed.
These accounting practices showed a complete lack of business ethics, as they were not designed to give shareholders and others with an interest any kind of accurate, truthful account, and were instead designed to abuse the trust of such shareholders in those accounting practices in order to further increase profits.
Enron would also hide any loss of income, with such practices as selling unprofitable subsidiaries to shell companies. These shell companies were actually owned entirely by Enron, but because the unprofitable subsidiaries were now off Enron’s accounting sheets, it looked as if Enron was no longer losing profit. Furthermore, Enron would be able to list the supposedly gained profit of the subsidiary’s sale on its financial reports, thereby appearing even more profitable. 
The lack of business ethics apparent throughout any examination of Enron’s practices shows exactly where lay the source of the Enron collapse. Enron did not hesitate to effectively lie to those to whom it had an obligation to present the truth. The problems were exacerbated by the collusion of Arthur Anderson, LLP, the accounting firm responsible for keeping Enron’s books.
A great deal of the criminality present in the entire Enron scandal came when Arthur Anderson began shredding papers, deleting documents, and eliminating e-mails in order to prevent investigators from finding anything incriminating. This is beyond just a lack of business ethics; the destruction of such information was a clear obstruction of justice.
The criminality of Enron’s profit inflation comes primarily from the way in which it deceived those who attempted to make a judgment about Enron based on its profits. Enron lied to the public, even if it was theoretically a lie of omission, in which the business practices were simply obscured and hidden under layers of manipulation, instead of being outright falsified. Inflating income in such an artificial, deceptive fashion is undeniably wrong, as it violates the most basic tenets of business ethics upheld by any kind of law.

Is it Even Possible to Enforce Business Law?

Is it Even Possible to Enforce Business Law?

 

Much as in domestic law, international business law cannot truly enforce international business ethics. This is the primary issue facing any kind of international business ethics enforcement. The international business law which might provide for such enforcement is often implemented by one country and one country alone; it can then implement that law against companies based within its own boundaries that violate the law in some substantial way, even if they violate that law in another country. But the problem remains that for enforcement of that international business law to actually take place, evidence has to be gathered that a violation of that law occurred in another country, which is generally difficult. As a result, such laws are inherently weaker, and many companies that obey such laws in the country in which they were implemented choose to ignore those laws in countries where their enforcement would be too difficult. If you need legal advice and assistance, contact business lawyers.

This is an example of very poor international business ethics, but unfortunately, it is an example far more common than most would like to imagine, primarily because international business ethics are not actually as uniform as they might be. A company from a country with no restrictions against certain practices will likely have to follow the laws of another country into which it extends, and therefore, might not extend its business into a country with overly restrictive policies. But that same company would be able to send its business into countries without laws and perform all kinds of unethical practices in those countries without fear of repercussion from that company's home nation. The result of all this is that some companies choose to ignore international business ethics in order to stay competitive with those companies that are not bound by international business law.

There have been some arguments in favor of the creation of a genuinely uniform international business ethics code that would at least present understandable guidelines for all businesses to agree on and follow. Such an international business ethics code might not have the force of law behind it, but it would certainly go a long way towards codifying the desirable business practices of any given business. It could also give every business adopting such a code an award that would identify it as exhibiting ethical procedures, which might be more effective at enforcing the international business ethics code than international business law. Regardless, such a code is likely a long way away, as there are too many business that are happily profiting from unethical behaviors in international business.

 

The Downfall of Enron

The Downfall of Enron

Enron rapidly fell from being one of the strongest, fastest growing companies in America to needing to file for bankruptcy and sell off all holdings. It happened because Enron had actually never been quite as strong or as quickly growing as it had appeared. Enron had, in reality, been hiding its practices and obscuring its finances in dense, complicated contracts and bizarre accounting procedures so that no one could successfully determine the real financial state of the company, and instead had to rely purely on the company’s own statements about its growth.  
Enron began as an energy company selling natural gas in 1985. In a very short time, it had become the biggest natural gas company in America, and after that it grew even larger. It expanded into different products and industries and even expanded beyond American borders. The company was consistently praised by financial analysts, winning Fortune’s “America’s Most Innovative Company” designation for six years in a row. 
Enron, for all that it was, a powerful company which periodically received criticism for some unethical, profit-based practices, was in general held to be a strong example of proper business practice. The fact, then, that this company was the source of such a tremendous scandal that rocked America in 2001-2002 took everyone by surprise, though in retrospect it makes a great deal more sense.
Enron’s success had come entirely from a series of policies and goals which were unsustainable and unethical. A focus entirely on profit, regardless of what action needed to be taken to generate that profit, lay at the core of many of Enron’s nastier practices, alongside a focus on short-term gain over long-term stability.
The company’s executives took every possible route they could to bend the rules and laws governing their practices in order to better generate profit for themselves, even as the consumers suffered for such practices. All of this led the company to its downfall in the huge, well-remembered scandal which then, in turn, led to the implementation of the Sarbanes-Oxley Act. 
Deregulation is the process by which markets are left less and less restrained by government restrictions and regulations, so that those markets can profit from freedom. Deregulation involves the elimination of as many government provisions against particular business practices as possible, excluding provisions against blatantly fraudulent practices. The idea of deregulation is that it will lead to a free market, which will be tremendously more profitable for all involved and will overall stimulate growth and success.
Effects of deregulation, however, are not as clear cut as many advocates would suggest, as evidenced quite clearly by Enron and its unethical actions. Enron took advantage of the deregulation of numerous markets to charge higher prices, passing on costs to consumers and thereby making tremendous profits. It lobbied strongly against any attempts to reinforce regulations. Enron also manipulated the deregulation of the California energy trade in order to artificially create an energy shortage, which allowed it to drive up prices and earn major profits, even on the eve of the company’s dissolution.
It is possible that greater regulation of business would have led to the discovery of Enron’s fraudulent practices much sooner, although this has not been determined and is hotly contested by many who continue to support deregulation. Regardless, Enron certainly rose to power thanks to deregulation, meaning that deregulation paved the way for the Enron scandal. To find out more about the relationship between Enron and deregulation, click the link.
Enron’s bankruptcy would have been unfortunate and would likely have hurt the market, but it would not have been anywhere near as damaging to countless individuals if there had been some warning that it was coming thanks to proper, truthful financial reports. Unfortunately, Enron’s downfall was characterized by practices focused solely on profit.
In order to better continue a flow of profit into the company, Enron had used accounting practices that artificially inflated its income reports, such that the company appeared to be making substantially more money than it actually was.
Enron reported the entirety of its transactions as profits, instead of reporting only the brokerage or trading fees, as was considered standard practice for companies of Enron’s nature. Enron also attempted to prevent any losses from showing on its financial reports by siphoning off losing subsidiaries and selling them to holding companies which were actually owned by Enron, thus allowing it to lend itself money and somehow report those loans as profit.
These practices were made even worse by the fact that Enron was not acting with blatant criminality. It was not falsifying documents, but instead was simply bending and twisting the rules as it saw fit in order to better serve its own purposes. Follow the link for more information about Enron and its practice of manipulating its financial reports to inflate its apparent profits.

Are You Concerned About Business Ethics?

Are You Concerned About Business Ethics?

The relationship between ethics and business has come under greater scrutiny of late, as the effects of major companies taking action without any restraining business ethics have come to light. Additionally, even more business ethics issues have arisen to be examined, as major events of historical importance are re-examined through a historical retrospective, only to find that there is more of a relationship between the lack of business ethics and some of the significant events of the past.
This relationship between business ethics issues and some of the major forces of the past has led to a more piercing look at the Cold War. Some have come to argue that many of the major conflicts of the Cold War were actually fought in favor of American businesses and their interests in foreign lands. In other words, there are some who contend that ethics and business were so far removed from each other during the Cold War that many of the conflicts were fought specifically on behalf of businesses, so as to help those businesses grow and develop.
Many take certain stances on the ideological elements of the Cold War, arguing that the very propaganda put out during the Cold War was designed in such a way as to transform the concerns of business into larger matters of world diplomacy, where American businesses were deemed as good and right and free, while any resistance against them was deemed as Communist and unethical.
Such claims are quite contentious, of course, as they are moderately unprovable and potentially unfairly portrayals of the role that business interests may have played in such conflicts. But the fact remains that such concerns have arisen over interpretations of the past, primarily because of business ethics issues of the present.
Today, business ethics issues are debated widely, often resounding at the core of different ideologies. For example, there are many who would defend the seeming lack of connection between ethics and business by arguing that the point of any given business is not to serve the consumer; it is instead to turn a profit. Thus, these people would argue that those actions which many see as irrefutable breaches of ethical behavior are actually simply in accordance with the real relationship between ethics and business, under which business ethics should serve to earn the business more money.
Most business ethics issues being debated today revolve around this same basic problem, of exactly what the purpose of a business is and along with it, what the relationship should be between ethics and business. Many might argue, for instance, that it is not a business’ responsibility to maintain the ethical standards that most would like to see of it, but instead, it is the Government’s responsibility. 
No matter exactly what business ethics issue is discussed, the fact remains that the relationship between business and ethics is being examined now more closely than ever, as the populace grows wary of businesses with as much power as many currently have.

The Scary Truth About the Drug Vioxx

The Scary Truth About the Drug Vioxx

The sale and spread of the drug Vioxx stands out as a recent case of business ethics. 
This drug was shortly enshrouded in controversy when it was discovered that Vioxx increased the risk of heart attacks in users by a fair amount more than its leading competitor. Some argued that this is because the leading competitor, naproxen, actually decreased the chances of heart attack, as opposed to Vioxx which increased those chances, which would explain why there were no signs of such a side effect in Vioxx test trials.
Merck dealt with the problem by changing the labels on Vioxx to inform users of the greater risks, only to then be confronted with genuine results two years later that proved that in long term users of Vioxx, risk of heart attack did increase.
Merck voluntarily withdrew Vioxx from the market in 2004, hoping to quickly put an end to the problem. Yet this did not end the issue, as many came out with information claiming that Merck knew of the heart risk problems of Vioxx for years before that 2004 withdrawal. Many former Vioxx users and family members of users began to sue Merck in an attempt to obtain some form of restitution for the heart attacks that users supposedly suffered as a result of use. Merck has since then been taken to court for using deceptive advertising practices, and had to pay a fine.
While it has not been conclusively shown that Merck knew of the negative side effects of Vioxx before it began offering the drug up for sale, the fact remains that Merck put the drug on the market before it truly knew the side effects.
Merck has been held accountable for failing to test Rofecoxib enough in its rush to get the drug out on the market and begin profiting from it, leading to numerous cases of individuals who may have experienced more harm than good as a result of using the drug. Merck’s rush of Rofecoxib, pushing it through approval with the FDA and onto markets, represents a violation of basic principles of business ethics.
Similarly, as soon as Merck found out about the risks of Rofecoxib and Vioxx in 2002, it should have taken the drug off the market and performed more research if it were to act ethically. Instead, however, Merck kept Vioxx on the market until the evidence had mounted to such a point that it could no longer ignore the dangers of the product.
Merck’s practices regarding Rofecoxib and Vioxx were clearly oriented towards generating profits, with no regard given towards protecting the consumer, and as a result, they stand in clear violation of principles of business ethics.

The Sarbanes-Oxley Act

The Sarbanes-Oxley Act

The Sarbanes-Oxley Act focused on public companies because the Enron and other scandals concerned public companies. In a public company, public investors can buy and hold shares of company stock, thereby putting some responsibility on the company to act in the interests of its shareholders, as well as in its own interests.
The fact that such scandals arose in public companies stood out, as such scandals were especially damaging to those stockholders who had put their trust and money into the company and were rewarded only with losing everything they had invested, thanks to the duplicity of the company’s directors. Sarbanes-Oxley, then, was an attempt to prevent such damage from being wrought against the stockholders in the future.
The passing of Sarbanes-Oxley was led by Representative Mike Oxley of Ohio and Senator Paul Sarbanes of Maryland, who presented the bill in the Senate. Their two names were attached to the final version of the bill when it was voted on by both the House and the Senate.
In general, the goal of the Sarbanes-Oxley Act was to prevent the same kinds of unethical procedures that had allowed for these scandals in the first place. By limiting the conflicts of interest of investigative auditing bodies, the Act would hopefully lead to a greater reliability of financial awareness and reporting.
Sarbanes-Oxley also put a fair degree of the onus for providing accurate reports of company finances on specific individuals within a given company, which means that if those financial reports were found to be inaccurate, then those individuals who had held responsibility for putting out such reports would be held accountable for the reports’ falsehood.
The Sarbanes-Oxley Act also made it specifically criminal to prevent the very type of document destruction or alteration that had allowed Enron and similar companies to commit such fraudulent scandals. The Act also increased the penalties for such crimes as a form of deterrence.
In the end, the Sarbanes-Oxley Act remains a model for the enforcement of business ethics in America. It takes many practices which should be held as very basic, standard ethical procedures in any given business and puts the full strength of the law behind them, ensuring that businesses will not be able to dodge such practices in the future.

The Sarbanes-Oxley Act and the Financial Crisis

The Sarbanes-Oxley Act and the Financial Crisis

The importance of the Sarbanes-Oxley Act of 2002 is shown by the praise of numerous financial experts, who have all pointed out that the Sarbanes Oxley Act has worked to increase investor confidence along with the amount of information going out to investors about businesses, so that no future scandals will be perpetrated. The Financial Executives International 2007 survey of Sarbanes-Oxley Act compliance supported this praise, with figures regarding investor confidence in financial reports all going up to some degree as the Sarbanes-Oxley Act continued to affect practices.
The Sarbanes-Oxley Act has also even helped to uncover certain instances of fraudulent behavior, such as the recently discovered Value Line scandal, which might not have been discovered at all had it not been for the Sarbanes-Oxley Act. A portfolio manager of the Value Line Fund was asked to put his signature on a Code of Business Ethics, under the provisions of the Sarbanes-Oxley Act. He reported the fraud being perpetrated by the Value Line Fund as a result of having to sign that Code.
Simultaneously, however, the Sarbanes-Oxley Act of 2002 has been met with a fair amount of criticism, casting its importance in an entirely different light. Critics claim that the Act, for all that it may be well-intentioned, has led to a significant disadvantage for U.S. businesses which now have to comply with the Sarbanes-Oxley Act, thereby restricting the practices available to U.S. businesses. This also forces them to pay high costs which further disadvantage them.
These critics also claim that the Sarbanes-Oxley Act has had the important yet damaging effect of leading to fewer and fewer companies registering publicly on the New York Stock Exchange, with many instead choosing to register on a United Kingdom stock exchange. The result is that, in general, the American stock exchanges are not as strong as they might be had the Sarbanes-Oxley Act not provided such stringent requirements with which businesses had to comply.
Furthermore, the recent financial crisis could, in part, be blamed on the effects of the Sarbanes-Oxley Act. Critics blame the scarcity of Initial Public Offerings in stock exchanges across America on the effects of the Sarbanes-Oxley Act. Many, thus, have called for the Act’s repeal, seeing it as having failed in its intended purpose and also as having brought on too many negative side effects.
Regardless of whether or not the import of the Sarbanes-Oxley Act of 2002 lies in its positive or negative effects, the fact remains the Act has clearly had an effect upon the nation. Determining exactly what that effect has been will likely take a long time and a great deal of retrospective examination, but understanding the Sarbanes-Oxley Act and its results will lead to further effective legislation down the road.

The Full Guide to the Sarbanes Oxley Act

The Full Guide to the Sarbanes Oxley Act

The Sarbanes-Oxley Act was put into effect after the string of scandals that rocked America in the early 21st century, with Enron being at the forefront.
The background of the Sarbanes-Oxley Act is best described in terms of the slew of scandals that cropped up, all at around the same time. These scandals depicted an American business world that was devoid of integrity and business ethics. 
The Sarbanes-Oxley Act might never have been created had it not been for the perfect storm of events that surrounded its origins. Indeed, were the bill to be proposed today, there is a fair argument to be made that it would be voted down by those in Congress too worried about the costs that it would incur.
But at the time it was proposed, the Sarbanes-Oxley Act met with near unanimous support, thanks to all the scandals that had rocked the nation in and around the time of its passing. It actually came from two different bills, one of which originated in the House of Representatives, the other of which originated in the Senate, which were later combined into the Sarbanes-Oxley Act. The bill was originally designed to plug in several holes left by common business rules. 
The importance of the Sarbanes-Oxley Act will not be understood for some time to come, as its effects are currently too close to the current situation in America. Though there can be no doubt that the Sarbanes-Oxley Act had an effect and has certainly changed the country, the issue of whether or not the costs of the Act outweigh its benefits or vice versa will not be decided with certainty in favor of one argument or the other for some time.
For now, the arguments rage on, as some politicians argue that the Sarbanes-Oxley Act has not only failed to perform its intended function, but has actually significantly hampered American businesses, thereby ensuring that the American economy has become weaker, potentially even contributing to the recent financial crisis. Others argue the opposite, that the Sarbanes-Oxley Act has fulfilled its function and has strengthened the American economy by leading to greater investor confidence, thanks to the renewed reliability of financial statements coming out of America’s major companies.  
It is entirely possible that elements of both arguments are accurate, that the Sarbanes-Oxley Act has simultaneously increased investor confidence while also increasing the costs for companies to operate publicly in America, and therefore, pushing more companies to operate outside of America.
But regardless of whether or not those benefits outweigh the drawbacks, the Sarbanes-Oxley Act holds definitive importance as one of the strongest pieces of modern legislation for enforcing business ethics through government (for more on business ethics and government, see also the Foreign Corrupt Practices Act). To learn more about the effects and importance of the Sarbanes-Oxley Act, click the link.