Corporate Ethics In The Post-Enron Era

The fallen Enron is known as the former model that belonged to the corporate social responsibility, or rather a veritable stakeholder dream of a theorist. First, its given code of ethics could tout diversity cum philanthropic giving. The second issue was that Enron’s former CFO, Andrew Fastow, was really hard working in the Houston Art Museum and had actually been the cornerstone when it came to the fund raising for the Houston’s Holocaust Museum. Thirdly, Clifford Baxter, who happened to be the Enron Executive vice-president, who is rumored to take his life just immediately after leaving this particular company, was one among the ones associated with the Junior Achievement.

Forth, the Enron paralleled Group, American Continental Co-operation, by the name Charles Keating, and the WorldCom, in relation to philanthropic activity. It is worth noting that all these given companies were all having some acting officers who would be in a great deal involved in various activities including the community and also the philanthropic activities, while the entire groups of the companies normally imploded from some given accounting improprieties. Fifth, according to their own understanding, with regard to the Skilling by Jeffrey, who was the former CEO, they were on the angels’ side.

A. SOA. The Section 406 that belongs to the SOA normally specifies that the SEC should issue some given rules that require each public company;

(I) disclosure of whether it has with it the code of ethics with regard to the annual report, and the code of ethics be applicable to the acting principal executive officer, the principal accounting officer or rather the controller though a person performing similar functions is also applicable, principal financial officer (collectively, the acting “senior officers”),

(ii) the disclosure (and this is strictly within five business days on form 8-k or its website) any existing change with regard to the code of ethics and any given waiver of the same code of ethics and all is under any senior officer. It is quite important to notice the importance of a company in easing the availability of the code of ethics to all the stockholders through either;

i. Publishing of the same on that particular company’s website or

ii. Inclusion of a copy in its report that is drawn on yearly basis. This is rather just having a separate code of conduct that is suitable to only the senior officers, some companies may go ahead and elect in order to make the ethical requirements with regard to the senior officers a part and parcel of its personal code of conduct with respect to all employees.

The agreed upon SEC rules (item 406 referring to Regulation and 406 of Regulation S-B) implementations of the Section 406 tend to define “code of ethics” as some standards that are designed reasonably in order to deter wrong doing and in promotion of:

1) Honest and also ethical conduct and this also includes some ethical handling of some actual or rather potential conflicts of interest in between personal and the professional relationships;

2) Accurate, full, fair, timely and at least some understandable disclosure in reports and some other documents’ filed with, or even ones submitted to, the SEC and also in other public communications that have originated from the company;

3) Total compliance when it comes to the applicable government laws, rules and regulations; the rapid reporting of code violations to a suitable individual or individuals as related to the code;

4) Accountability when it  comes to the total adherence to the code

5) B. Requirements. NYSE Proposed Rule 303A (10) would sometimes require that those of the listed companies to ensure adoption of a “code of conduct and ethics” for the officers, directors and generally all the employees. This particular rule would require that each company ought to publicly disclose its associated code and with an immediate effect hastily disclose any possible waivers of its given code with regard to the acting officers and the directors. It’s only that particular board or even the board committee that can be in a position to grant a waiver for an officer and sometimes a director.        Although the code of the company has to be determined by the company the rules of NYSE identifies the particular topics which could be required so as to be addressed in the code.NASDAQ anticipated rule 4350(m) required the companies to adopt a code of ethics which covers (I) the conflicts of interest (ii) compliance with laws regulations and the rules. This rules required the company’s code of ethics to be enforced provisions and the waivers of directors and the officers to be granted by the board or the board committee on qualified and limited basis.

Observations: since the topics which are covered by the codes of ethics differ, most of the covered topics happen to be shown in the summarization of the code of the ethics which is attached as an Appendix C. 4.2 “Whistle-Blower” Requirement. Employees, the section 806 which is the SOA which makes it to be unauthorized for the companies so that the companies would take a unfavorable employment action which is against the employee who happens to provide information which would assist in the investigations or which would participate in the proceeding records conduct that the employee logically believes to have been involved in mail, bank, wire, television, securities fraud or the bank which violates any of the rules of SEC or any provision of the federals law which relates to fraud against the shareholders, as such information or the D-Corp Gov .doc  12  assist that provides the Federal agency, who is a member or a committee Congress or a people who supervises the employee. Any employee who seeks a release beneath the section 806 records a grievance with the U.S. Secretary who is concerned with labor in 90 days supposed violation. Employee that makes grievances haves  burden to establish a prima facie case which whistler- blowing act happens to be contribute factor of adverse employment decisions. Nevertheless, there is no relief which might be ordered when the employees demonstrates that the   unfavorable action might take place in absence of protected behavior. Remedy under the Section 806 includes the reinstatements, the attorney fees, back pay, litigation costs and the witness fees, except the punitive damages. Lastly, new federal whistle –blowers protected statute do not obstruct the other federal and the state whistle-blowers statutes.

Grumble handling the procedures which are under the section 301 of SOA, the review committee requires to establish the procedures of handling the whistle-blower protests that are received from the company regarding the accounts, the internal control or the reviewing matters. Procedures of handling the complaints which concerns the accounting, auditing matters and internal control might be include in the company’s code of ethics.  Naturally, the procedures which relates to the whistle-blowers complaints on the accounts with the related problems have to set a statement concerning the company’s commitment in agreement with the applicable security law and regulations, the accounting standards, controls and auditing practices.

(ii).It encourages the employees to notify the company of conduct the amounting complying with violation of related standards according to the procedures.

(iii) It also describes the prohibited conduct also provides specific examples that are relevant to business.

(iv). It establishes complaints procedures which the employees easily use involving the making of unidentified complaints; and

(v) .It also provides assurances that there would be no reprisal that reports the suspects of violations and the report remains to be confidential.

B. The legal Counsel. Section 307 of SOA which directs the SEC adopts regulations which establishes minimum values of conducting the attorneys which practices previous   on the SEC. On January 29, 2003, SEC happens to adopt Rule 205.  The regulations which provides appearing or the practicing of previous SEC represents the company. The attorney happens to be aware of the proof of the material violations by the company. The attorney has to report the material violation by company’s initial with the chief legal officer and if there is an appropriate responses which are not received.

(ii). (Clayton Center for Entrepreneurial Law, 2004) An attorney becomes aware a proof of material violation by D-Corp Gov. doc  to auditing committee or other board which consists sole independence of directors. Practicing or appearing which is before the SEC happens to be defined in broad. Similarly the word material violation happens to be defined involving the security law violation and the breaches of the fiduciary duty. The security Analysts Conducts Requirements, section 501 of SOA addresses the conduct of security forecasters by registering the security organizations and the national security exchanges. The section 501 compensates the exchange act by having an addition of section 15D. The security Analysts and the Reports has an objective on section 15D to improve the object of research and also provide investors with dependable information. After one year, after the date of endorsement of Section 15D, the SEC  ahead of the approval of direction of SEC, a recorded securities organization or national  securities exchange, adopts some rules which are designed to (a) deal with the conflicts of notice which might rise when the security analysts and  the recommended equity security in the research reports and the public manifestations and (b) it also requires securities analysts to reveal in public manifestations, and broker-dealers to unveil in the research of reports, conflicts of concern which are known by the securities analyst or the broker-dealer to  subsist during the time of manifestation or distribution of the report. So as to satisfy provisions of section (a) rules should involve the provisions that to satisfy the provisions of clause (a) the rules must include provisions that restricts the prepublication approval or the clearance of the research on reports by the individuals who are employed  by the broker-dealer engaged in the investment of banking, activities, or peoples who are not direct responsible for the investments research, a part from the legal or conformity staff ; this limits the supervisions and the compensatory  assessment of the securities analyst to the individuals employed by broker-dealer that are not engaged in the investment of banking; requires that the broker- dealers and the employees who get involved to the investment banking might not indirectly or directly  react against or intimidate the retaliate against its security analysts as result of an adverse research report which defines periods at the time when the brokers-dealers who contributed in the public offering as the sponsors or dealers are not supposed to publish  dispense research reports which reports to the related securities or issuer of a such securities; also establish appropriate information which separations to enhance that the securities  analysts gets separated from appraisal , pressure or the omission of those whose inclusions in the investments banking activities may potentially prejudice their judgment or their supervision. To satisfy the provision  of section (b) rules should be required to follow the information  which is to be disclosed: (I) the level in which securities  analysts gets invested ton the applicable issuer  of the report or the exterior; (ii)  if any of the compensation happens to be received by broker-dealer, then associate, involving the security analyst, from a relevant issuer   subjected to the definite exemptions as the SEC might determine it appropriately ;(iii) whether the applicable issuer presently is or at the time of preceding year happens to be a client of broker-dealers  and if that is it, begins the types of the services that are provided by the issuer;

(iv). Whether the security analyst receives the compensation, with the due respect of the report that is based on the investment banking revenues; also other revelations or the conflicts of interest which happens to material as the SEC resolves it appropriately. These requirements have been mainly tackled in NASD Rule 2711, revised NYSE Rule 472, and the planned Instruction AC (Clayton Center for Entrepreneurial Law, 2004).

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