corporate ethics and leadership presented at national chung cheng university january 9, 2006
DESCRIPTION
Corporate Ethics and Leadership Presented at National Chung Cheng University January 9, 2006. Jason Lin, Ph.D. Professor of Business Administration Truman State University. Outline. What is OK behavior Defining Ethics Types of Unethical Behavior Big Financial Scandals - PowerPoint PPT PresentationTRANSCRIPT
Corporate Ethics and Leadership
Presented at National Chung Cheng University
January 9, 2006
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
Outline What is OK behavior Defining Ethics Types of Unethical Behavior Big Financial Scandals Payoffs of Integrity Overview of Sarbanes-Oxley Act of 2002 Sarbanes-Oxley and Corporate Governance Suggestions to Improve Corporate Governance Quality of Leadership Ethical Responsibility Questions
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
Is it OK ?
To overlook a classmate cheating as long as he or she is your friend?
To use a project idea from a fellow student? To use a source of information and pass the work off
as your own? To steal a business idea from a co-worker? To be a free rider of a group project for class? To take home small office supplies for personal use? For a manager to overlook undesirable behavior of
people in the organization who are well-liked?
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
What is Ethics?
A system or set of moral principles. The rules of conduct governing a particular class of human actions or a particular group, culture.- Webster College Dictionary
Standards of conduct which indicate how one should behave based on moral duties and virtues rising from principles of right and wrong.
Why important?Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
Who acts unethically?*
All levels of American Workforce Nearly half of U.S workers act unethically
- cheating on expense account- Discriminating against co-workers- paying or accepting kickbacks
Attributed to “pressure” due to long hours, sales quotas, job insecurity, balancing work and family, personal debt.
* “Doing the Wrong Thing” Published in the USA TodayJason Lin, Ph.D.Professor of Business AdministrationTruman State University
Top 5 Types of Unethical Behavior*
1) Cut corners on quality control2) Covered up incidents3) Abused or lied about sick days4) Lied to or deceived customers5) Put inappropriate pressure on others
* “Doing the Wrong Thing” Published in the USA Today
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
Big Financial Scandals
Enron’s Financial Scandal The seventh largest energy company in the US Past earnings were overstated by $500 million Liabilities were understated by billions of dollars The largest bankruptcy filing in the US history Over $ 80 billion of stock market value evaporated
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
Enron’s Scandal
Auditors – Arthur Anderson and Enron Top executives knew in Feb 2001
Found guilty of obstruction of Justice in the case Consequences Top executives in trials (Jan. 17, 2006) Arthur Anderson in court Investors lost billions Enron Employees
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
MCI WorldCom’s Financial Bomb
The second largest long-distance telephone provider in the US
Improperly booked $ 3.8 billion over the past 5 quarters ($11 Billion)
Over $ 125 billion dollars of stock market value evaporated
Auditors – Arthur Anderson Bernard Ebbers was sentenced 25 Years
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
Tyco International’s Scandal
CEO/CFO/General Counsel indicted for fraud and theft by the SEC in Sep 2002
CEO/CFO issued bonuses to themselves without board’s approval
CEO/CFO/GC accused of looting $ 600 million from Tyco
CEO/CFO assets frozen by court order Dennis Kozlowski was sentenced 25 Years
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
Payoff of Integrity
More effective leadership More trusting personal relationship More effective organizations Stronger communities Better feelings about ourselves
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
Reasons for Sarbanes-Oxley (SOX) Act
Corporate Boards are not independent Huge stock options are used as
compensation Stock options are not expensed CEO’s of large companies have lost public
trust No incentive to report misconduct
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
The Sarbanes-Oxley (SOX) Act of 2002
Established the Public Company Accounting Oversight Board
Increased communication Provide Audit Committee with funding for
outside advisors Prohibits future loan’s to officers and
directors
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
The Sarbanes-Oxley Act of 2002
CEO/CFO certify financial statements Top management monitors and reports on
internal controls External auditors must evaluate
management’s approval of internal controls
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
The Sarbanes-Oxley Act of 2002
Illegal for director/officer to fraudulently influence independent auditors
Accelerated reporting of trades by insiders Companies will disclose whether it has code
of ethics for its senior financial officers Unlawful to punish or retaliate against those
reporting unethical behavior
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
The Sarbanes-Oxley Act of 2002
Public accounting firms register with Public Company Accounting Oversight Board
Attorneys will report evidence to material violations of securities laws
Increased criminal penalties for CEO/CFO certifying and filing in bad faith
Criminal penalties for altering, destroying, mutilating, or concealing documents
Securities analysts must adopt conflict of interest rules Large corporations have to be in compliance by June 15, 2004 Smaller companies have to comply by April 15, 2005
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
Sarbanes-Oxley and Corporate Governance
Executive Compensation (Larry Ellison, Dick Grasso)
Independent Board of Directors (Imbalance of Power)
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
Balance of Power in Corporate Governance
CEO & Mgmt
Transparent Updates & strategic financial direction reports Company capital & CEO
oversight
weak controls, little influenceShareholders Board
Minimal information flow, no individualaccountability
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
Suggestions to Improve the Imbalance
Make directors accountable to shareholders Separate positions of chairman and CEO Reinvigorate shareholders Give Board sufficient funding
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
QUALITIES OF LEADERSHIP
Accept challenges and take risks Master both listening and speaking Live by the values they profess Freely give away their authority Recognize the best in others Have a vision and convince others to share it
TRUE LEADERS?
THE GOOD LEADER: Sun, Yat-Shan, Winston Churchill, Sam Walton, Jack Welch, Warren Buffet
THE BAD LEADER: Larry Ellison, Michael Eisner, Dick Grasso
THE UGLY LEADER: Bernard Ebbers, Ken Lay, Dennis Kozlowski, J.N. Chen, S.F. Yeh
Layers of Responsibility for Ethics
Individual Action
CompanyRegulations
Government and SystemsRegulations
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
Ethical Evolution
Ethical Courage
Ethical Leadership
Ethical Knowledge
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University
?
Thank You for Your Attention
Jason Lin, Ph.D.Professor of Business AdministrationTruman State University