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Corruption Perceptions Index (CPI)

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a report published each year by Transparency International, providing metrics to the potential corruption risk for 180 countries

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corporate social responsibility (CSR)

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a company's obligations to society, including the welfare of people and places affected by company activities

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ethics

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the branch of philosophy that addresses the values pertaining to human behavior, with regard to the "rightness" and "wrongness" of actions and to the "goodness" and "badness" of the intent and results of such actions

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Foreign Corrupt Practices Act (FCPA)

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Applies to U.S. firms and to foreign firms that engage in business in the U.S. a U.S. federal law that consists of two parts: an anti-bribery provision and a requirement to maintain an adequate internal control system over financial books and records

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integrity

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adherence to moral and ethical principles; soundness of moral character; honesty. As a practical matter, a person of integrity knows what is right and has the courage to do it

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internal controls

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a system of rules and procedures designed to ensure the accuracy and reliability of financial and accounting information

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mark to market accounting

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accounting practices that update the value of an asset to its current market levels

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Ponzi scheme

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a type of fraud, also called a pyramid scheme, in which money received from later investors is used to provide returns to earlier investors, thus giving an appearance of a profitable investment

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Imperative Principle

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do what is right

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Generalization Argument

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Do what is right, but filter the action by consideration of the consequences.

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Utilitarian Principle

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Do what produces the greatest good.

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step 1

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Define all the facts and circumstances, including who, what, where, when, and how. BASIC STEPS IN ETHICAL DECISION-MAKING

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step 2

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Identify the people affected by the situation and their rights and obligations. BASIC STEPS IN ETHICAL DECISION-MAKING

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step 3

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Identify the alternative decisions and consequences. BASIC STEPS IN ETHICAL DECISION-MAKING

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step 4

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Make the decision: determine the right thing to do and then do it. BASIC STEPS IN ETHICAL DECISION-MAKING

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build trust

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Establish and maintain a positive track record in the marketplace

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Advertise Honestly

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Adhere to established standards of advertising and selling.

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Tell the truth

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Honestly represent products and services, including clear and adequate disclosures of all material terms.

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Be Transparent

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Openly identify the nature, location, and ownership of the business, and clearly disclose all policies, guarantees, and procedures that influence a customer's decision to buy.

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Honor Promises

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Abide by all written agreements and verbal representations.

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Be Responsive

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Address marketplace disputes quickly, professionally, and in good faith.

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Safeguard Privacy

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Protect any data collected against mishandling and fraud, collect personal information only as needed, and respect the preferences of customers regarding the use of their information.

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Embody Integrity

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Approach all business dealings, marketplace transactions, and commitments with integrity.

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mutual trust, fair dealings, honest communication

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• For ethical business activity to occur, ____ _____ , ____ _____, and _____ _____ are essential

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Ethics and Economics

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- Unethical behavior (e.g., inside information) destroys fair investment markets - Commonly-shared positive ethical values regarding respect for individuals, their lives, their property, and their freedoms promote individual integrity and doing the "right thing"

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CSR Actions

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Provide quality products or services - Engage in ethical accounting and principled business practices - Be responsible for fair treatment of employees - Meet the firm's obligations to all stakeholders • Customers, suppliers, creditors, lenders, and investors - Care for and protect the environment

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Making an ethical choice:

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- Follow legal rules - Apply the formal ethical policies of your organization - Use your moral intuition to answer the following: • What would your mother or father say if you acted in that way? • How would you feel if you saw your situation described in the newspaper? • Does the situation "smell bad?" • Would you use your behavior as a marketing tool?

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The Principle of Consistency

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- Considering what would be the consequences if everyone made the same choice that you are about to make.

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The Principle of Respect

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To apply the principle of respect, you would choose the alternative or choice that treats people with the greatest respect.

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Enron

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Was a major global provider of electricity, natural gas, pulp and paper, and communications services - Used innovative and misleading accounting in "cooking its books" to avoid disclosing unprofitable operations - Was a key event leading the U.S. Congress to pass a new federal securities law for financial accounting and reporting transparency, the Sarbanes-Oxley Act of 2002, often referred to as "SOX"

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WorldCom

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- Used fraudulent accounting methods to manipulate earnings to present a false image of growth and prosperity to prop up the firm's stock price - Underreported "line costs" as assets rather than expensing them and fraudulently overstated revenues - Internal auditors eventually discovered the fraud and the firm filed for bankruptcy protection which wiped out the investments of stock and bond holders

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Vivendi

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- Used fraudulent accounting methods for several years to hide cash flow, liquidity, and financial obligation problems to boost its apparent financial performance to enhance its stock price and make several acquisitions

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Parmalat

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- Used risky derivatives and purchase of its own debt to disguise losses in several of its new international acquisitions - Was placed under control of a commissioner by the Italian government after the firm collapsed into bankruptcy when it could not pay of its debt and make its bond payments

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Teapot Dome Scandal

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- Resulted from the secret leasing of Teapot Dome oil reserves to a businessman who paid Secretary of the Interior Albert Fall hundreds of thousands of dollars in zero-interest loans

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Fundamentals of Ethics Education

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Personal integrity Responsibility of business in society Ethical decision making Ethical leadership Corporate governance

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Internal Control Procedures

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- Preventing accidental errors and irregularities (intentional misrepresentations) - Identifying errors and irregularities for corrective action

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Sarbanes-Oxley Act ("SOX") of 2002

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Increased the prison sentence for fraud to 25 years - Established 20-year sentences for destroying, altering, or fabricating records in federal investigations, or any scheme to defraud shareholders - Requires that the Chief Executive Officer and Chief Financial Officer of a publicly traded corporation must certify that its financial statements accurately presents the firm's financial condition and results of the firm's operations

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Basic Threats to Computer Security

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- Natural disasters - Dishonest employees - Disgruntled employees - Persons external to the organization - Accidental errors and omissions

MGT 302 CH.7 CORRUPTION AND ETHICS IN GLOBAL BUSINESS – Flashcards

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